E14-6 (Amortization Schedulesâ?"Straight-Line)
Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1.
Set up a schedule of interest expense and discount amortization under the straight-line method.
E14-7 (Amortization Scheduleâ?"Effective-Interest)
Assume the same information as E14-6.
Set up a schedule of interest expense and discount amortization under the effective-interest method. (Hint: The effective-interest rate must be computed.)
See excel attached for two amortization schedules (click in cells to see calculations) and an IRR analysis to obtain the effective interest rate.