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Effective Interest Method Overview

This document contains financial information about various bonds, including balances, interest income, interest received, and amortization for several periods. It shows details for individual bonds such as face value, discount, premium, and gains from sales. The balances change over time as interest is paid and the bonds are amortized.

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Jomer
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21 views17 pages

Effective Interest Method Overview

This document contains financial information about various bonds, including balances, interest income, interest received, and amortization for several periods. It shows details for individual bonds such as face value, discount, premium, and gains from sales. The balances change over time as interest is paid and the bonds are amortized.

Uploaded by

Jomer
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Interest Income Interest received Amortization

Beginning balance - Jan 1


28-Feb-20 130,000.00 120,000.00 10,000.00
1-Mar-20
x number of coupons
Carrying amount per bond
x number of coupons sold
Carrying amount of bonds sold
Less: Selling price
Gain on sale of bonds
Balance
7,800,000.00
7,810,000.00
7,810,000.00
8,000.00
976.25
4,000.00
3,905,000.00
3,920,000.00
15,000.00
Bond face value 1,000,000.00
Less: Discount (100,000.00)
Carrying amount 900,000.00
Add: amortization 20,000.00
Carrying amount 920,000.00
Less: selling price 1,140,000.00
Gain on sale 220,000.00

Discount 100,000.00
Add: Premium 140,000.00
Total 240,000.00
Less: Amortization 20,000.00
Gain on sale 220,000.00
Interest Income Interest received Amortization Balance
Beginning balance - Jan 1, 2020 3,767,000.00
31-Dec-20 527,380.00 480,000.00 47,380.00 3,814,380.00
Interest Income Interest received Amortization Balance
Beginning balance - Jan 1, 2020 3,756,000.00
31-Dec-20 375,600.00 360,000.00 15,600.00 3,771,600.00
Effective interest Norminal Interest Face value
10% 8% 5,000,000.00
Interest Income Interest received Amortization
Beginning balance - Jul 1
31-Dec-20 230,750.00 200,000.00 30,750.00

1-Jul Investment in bonds 4,615,000.00


Cash

31-Dec-20 Interest receivable 200,000.00


Investment in bonds 30,750.00
Interest income
Balance
4,615,000.00
4,645,750.00

4,615,000.00

230,750.00
Effective interest Norminal Interest Face value
8% 10% 1,000,000.00
Interest Income Interest received Amortization Balance
Beginning balance - Jul 1 1,198,000.00
31-Dec-20 47,920.00 50,000.00 (2,080.00) 1,195,920.00

Discount = FV > Amount paid


Premium = FV < Amount paid

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