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Grider Industries: Amortization of discount or premium bonds

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Grider Industries, Inc. issued $8,000,000 of 8% debentures on May 1, 2012 and received cash totaling $7,098,102. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2020. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective-interest rate of 10%.

Calculate the total dollar amount of discount or premium amortization during the first year (5/1/12 through 4/30/13) these bonds were outstanding. (Show computations and round to the nearest dollar).

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Solution Summary

Coaching and computations are shown with a full amortization schedule for the life of the bonds.

$2.19