Standard Autoparts Inc. issued $100,000 of 7%, 10-year bonds at a price of 87 on January 31, 2017. The market interest rate at the date of issuance was 9%, and the standard bonds pay interest semi-annually.

1. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Use Exhibit 8-3, page 393, as a guide, and round amounts to the nearest dollar.

2. Record Standard's issuance of the bonds on January 31, 2017, and payment of the first semi-annual interest amount and amortization of the bonds on July 31, 2017. Explanations are not required?

Debt Amortization for a Bond Discount

Panel A - Bond Data

Panel B-Amortization Table

*Adjusted for the effect of rounding.
Notes
*Column B The semi-annual interest payments are constant (fixed by the bond contract).
*Column C The interest expense each period = Preceding bond carrying amount × Market interest rate.
Interest expense increases as the bond carrying amount (F) increases.
*Column D The excess of interest expense (C) over interest payment (B) is the discount amortization (D) for the period.
*Column E The discount balance (E) decreases when amortized.
*Column F The bond carrying amount (F) increases from $96,149 at issuance to $100,000 at maturity.

1 Issue date-January 1, 2017 Market interest rate at time of issue-10% annually, 5% semi-annually Issue price-$96,149 2 Maturity (face) value-$100,000 3 Stated interest rate 9% Maturity date -January 1, 2022 4 | Interest paid-4% semi-annually, $4,500-$100,000 X 0.09 X 6/12 Interest PaymenInterest Expense od Discount Bond Discount Bond Semi-Annual (4 % of | (5% of Preceding Bond Carrying Amount) Account Balance | Carrying Amount (Preceding E-D)($100,000 E) Amortization Interest De Maturity Value (C-B) 2 Jan. 1, 2017 3 July 1 4Jan. 1, 2018 5 July 6 Jan. 1, 2019 7 July 1 8 Jan. 1, 2020 $4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,807 4,823 4,839 4,856 4,874 4,892 4,912 4,933 4,954 4,961 $307 323 339 356 374 392 412 433 454 461 3,851 3,544 3,221 2,882 2,526 2,152 1,760 1,348 951 461 0 $ 96,149 96,456 96,779 97,118 97,474 97,848 98,240 98,652 99,085 99,539 100,000 9 July 10 Jan. 1, 2021 11 July 1 12 Jan. 1, 2022 13