On 1 January 2019, DVD Custom Ltd issued 2,000 three-year bonds with a face value of $100 and coupon rate of 5% per annum. The market rate was 6% on the date that the bonds were issued. The company received $194,654 cash from investors for the bonds.
Required:
Using the effective interest rate method, complete an amortization table for DVD Custom Ltd’s 3-year bonds. Round your answers to the nearest dollar (i.e. zero decimal places).
Use the answer template below
DVD Custom Ltd’s Amortization Table for 3-Year Bonds:
Year
Opening balance
(1 Jan)
Effective Interest (market rate = 6%)
Interest to be Paid (coupon rate = 5%)
Increase in carrying value
Closing balance
(31 Dec)
1*
2
3*
* Year 1 is 1 January 2019 to 31 December 2019
** Year 3 is 1 January 2021 to 31 December 2021
