The following partial amortization schedule is available for Crane Company who sold $1200000, 5-year, 10% bonds on January 1, 2020 for $1248000 and uses annual straight-line amortization.BOND AMORTIZATION SCHEDULEInterest PeriodsInterestto be paidInterestexpensePremiumAmortizationUnamortizedPremiumBond CarryingValueJanuary 1, 2020 $48000$1248000January 1, 2021(i)(ii)(iii)(iv)(v)Which of the following amounts should be shown in cell (v)?$1238400$1243200$1252800$1257600

An amortized bond is one in which, during the course of the bond's existence, both the principal amount of the debt and the interest expense are required to be routinely paid down. Example- fixed-rate home mortgage, where the monthly payment is fixed throughout the loan's term.Computation of amount to be shown in cell (v) is as follows: Annual amortization of premium = $48,0005 years=$9,600Bond carrying value on January 1, 2021 (v) =$1,248,000-$9,600=$1,238,400Answer: Correct option is A i.e. $1,238,400

Answered: The following partial amortization…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following partial amortization schedule is available for Crane Company who sold $1200000, 5-year, 10% bonds on January 1, 2020 for $1248000 and uses annual straight-line amortization.

Interest Periods	Interest to be paid	Interest expense	Premium Amortization	Unamortized Premium	Bond Carrying Value
BOND AMORTIZATION SCHEDULE
January 1, 2020				$48000	$1248000
January 1, 2021	(i)	(ii)	(iii)	(iv)	(v)

Which of the following amounts should be shown in cell (v)?

$1238400

$1243200

$1252800

$1257600

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