Amortization of Premium or Discount Bonds payable are dated January 1, 2010, and are issued on that

Question:

Amortization of Premium or Discount Bonds payable are dated January 1, 2010, and are issued on that date. The of the bonds is $100,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%.

Required
1. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period?
2. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2010? What amount of interest expense should be reported for the period from July 1 to December 31, 2010?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...