On October 1, 2017, Best Biopharma Inc. issued a $750,000, 7%, seven-year bond. Interest is to be paid annually each October 1.

Requireda. Calculate the issue price of the bond assuming a market interest rate of 5%.b. Prepare an amortization schedule similar to Exhibit 14.15 using the effective interest method.

Data from in Exhibit 14.15

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EXHIBIT 14.15 Effective Interest Amortization of Bond Premium Period Ending Dec. 31/17. Dec. 31/18. Dec. 31/19. Dec. 31/20... Dec. 31/21. Totals A Cash Interest Paid $50,000 x 14% $7,000 7,000 7,000 7,000 $28,000 B Period Interest Expense (E) X 12% $ 6,364¹ 6,2882 6,203 6,109³ $24,964 C Premium Amort. (A) - (B) $ 636 712 797 891 $3,036 1 $53,036 x 0.12 $6,364 2 $52,400 x 0.12 = $6,288 3 Adjusted for rounding. Column (A) is the bonds' par value ($50,000) multiplied by the annual contract rate (14%). Column (B) the bonds' prior period carrying value multiplied by the annual market rate (12%). Column (C) is the difference between interest paid and bond interest expense, or [(A) - (B)]. Column D is the prior period's unamortized premium less the current period's premium amortization. Column (E) is the bonds' par value plus unamortized premium, or [$50,000+ (D)]. D Unamortized Premium $3,036 2,400 1,688 891 -0- E Carrying Value $50,000+ (D) $53,036 52,400 51,688 50,891 50,000