【正文】 10 736 Payment of semiannual interest: Interest Expense. . . . . . . . . . . . . . . . . . . . . . . 5,736 Discount on Bonds . . . . . . . . . . . . . . . . . 736 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 26 Effective Interest Amortization ? Amortizes a varying amount of discount or premium each period. ? This amount is the difference between the interest actually incurred and the cash actually paid (like the amortization schedule for the mortgage). ? Interest actually incurred is the bond carrying value multiplied by the effective interest rate. 27 Effective Interest Amortization ? For Bond issued at premium: Interest Incurred Amortization of Premium Bond Carrying (Bond Carrying Value X (Interest Incurred – Value Payment Effective Interest Rate) Payment) 108,114 1 5,000 4,325 675 107,439 2 5,000 4,298 702 106,737 3 5,000 4,269 731 106,006 4 5,000 4,240 760 105,246 5 5,000 4,210 790 104,456 4th Payment of semiannual interest: Interest Expense. . . . . . . . . . . . . . . . . . . . . . . 4,240 Premium on Bonds . . . . . . . . . . . . . . . . . . . . 760 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 28 Retirement of Bonds with a Discount or a Premium ? Retirement at maturity is the same as at face value because the discount or premium is amortized to zero at maturity. ? Sayer Co. desires to retire its 5year bonds issued at a premium after 2 years (4 payments). The bonds are retired at 105: Retirement of Sayer Co. bond at 105: Bonds Payable . . . . . . . . . . . . . . . . . . . . . . .100,000 Premium on Bonds . . . . . . . . . . . . . . . . . . . 5,246 Gain on Bond Retirement . . . . . . . . . . . 246 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000 。COPYRIGHT 169。 2022 Thomson SouthWestern, a part of The Thomson Corporation. Thomson, the Star logo, and SouthWestern are trademarks used herein under license. 1 Chapter 10 LongTerm Debt Financing Albrecht, Stice, Stice, Swain 2 Present Values ? The value today of $1 to be received or paid in the future, given a specified interest rate. ? $ is the present value of $100 received in one year. $ $100 One Year Period at 10% rate Present Value 3 Future Values ? The value in the future of $1 to be received or paid today, given a specified interest rate. ? $100 is the future value in one year of $ paid or invested today. $ $100 One Year Period at 10% rate Future Value 4 Computing Present Values ? Using present value tables (Table I): ? Choose the time period and interest rate used. ? Multiply the factor