(2-10)

Date Nominal Interest Effective Interest Discount Bond Carrying

Amortization value
03/01/13 3,926,000
09/01/13 170,000 176,670 6,670 3,932,670
03/01/14 170,000 176,970 6,970 3,939,640
09/01/14 170,000 177,284 7,284 3,946,924
03/01/15 170,000 177,612 7,612 3,954,536
09/01/15 170,000 177,954 7,954 3,962,490
03/01/16 170,000 178,312 8,312 3,970,802
09/01/16 170,000 178,686 8,686 3,979,488
03/01/17 170,000 179,077 9,077 3,988,565

A. Interest Expense -9/1/13 = 176,670

Discount Amortization- 9/1/13 = 6,670

B. CA of Bonds – 9/1/14 = 3,946,924

Amortization 12/31/14 – 7612 x 4/6 = (5,075)
CA of bonds 12/31/14 = 3,951,999

C. Retirement Price (4M x 101) = 4,040,000

Accrued Interest (4M x 8.5% x 1/12 = 28,333
Amount of cash paid = 4,068,333

D. Carrying Value – 9/1/16 = 3,979,488

Amortization 9/30/17 (9077 x 1/6) = 1,513
Carrying Value – 9/30/16 = 3,981,001
Retirement price (4M x 101%) = 4,040,000
Loss on Retirement = (58,999)