Answer:
interest portion (17th payment) = $22.24 ≈ $22
premium amortization portion (17th payment) = $17.76 ≈ $18
Explanation:
the market price of the bond:
PV of face value = $1,000 / (1 + 2%)²² = $646.84
PV of coupon payments = $40 x 17.658 (PV annuity factor, 2%, 22 periods) = $706.32
market price = $1,353.16
the journal entry to record the investment in bonds:
Dr Bonds receivable 1,000
Dr Premium on bonds receivable 353.16
Cr Cash 1,353.16
I prepared an amortization schedule using excel to determine the interest portion of the 17th payment and the premium amortization portion.
interest portion (17th payment) = $22.24 ≈ $22
premium amortization portion (17th payment) = $17.76 ≈ $18
