Standard Autoparts Inc issued 100 000 of 7 10 year bonds

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Standard Autoparts Inc issued 100 000 of 7 10 year bonds at

Standard Autoparts Inc. issued $100,000 of 7%, 10-year bonds at a price of 87 on January 31,
2017. The market interest rate at the date of issuance was 9%, and the standard bonds pay
interest semi-annually.

1. Prepare an effective-interest amortization table for the bonds through the first three interest
payments. Use Exhibit 8-3, page 393, as a guide, and round amounts to the nearest dollar.

2. Record Standard's issuance of the bonds on January 31, 2017, and payment of the first semi-
annual interest amount and amortization of the bonds on July 31, 2017. Explanations are not
required?

Debt Amortization for a Bond Discount

Panel A - Bond Data

Panel B-Amortization Table

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 *Adjusted for the effect of rounding.

Notes

*Column B The semi-annual interest payments are constant (fixed by the bond contract).

*Column C The interest expense each period = Preceding bond carrying amount × Market
interest rate.

Interest expense increases as the bond carrying amount (F) increases.

*Column D The excess of interest expense (C) over interest payment (B) is the discount
amortization (D) for the period.

*Column E The discount balance (E) decreases when amortized.

*Column F The bond carrying amount (F) increases from $96,149 at issuance to $100,000 at
maturity.

Standard Autoparts Inc issued 100 000 of 7 10 year bonds at

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