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Instructions:
Determine the premium expense to be reported in the income statement
and the estimated liability for premiums on the balance sheet for 2010
and 2011.
Question 4. (TCO D) On January 1, 2011, Piper Co. issued 10-year
bonds with a face value of $1,000,000 and a stated interest rate of 10%,
payable semiannually on June 30 and December 31. The bonds were
sold to yield 12%. Table values are:
Present value of 1 for 10 periods at
10%
.386
Present value of 1 for 10 periods at
12%
.322
Present value of 1 for 20 periods at
5%
.377
Present value of 1 for 20 periods at
6%
.312
Present value of annuity for 10 periods at
10%
6.145
Present value of annuity for 10 periods at
12%
5.650
Present value of annuity for 20 periods at
5%
12.462
Present value of annuity for 20 periods at
6%
11.470
Instructions:
- Calculate the issue price of the bonds.
- Without prejudice to your solution in Part (a), assume that the issue
price was $884,000. Prepare the amortization table for 2011, assuming
that amortization is recorded on interest payment dates.