On October 1, 2020, Ross Wind Energy Inc. issued a $1,500,000, 7%, seven-year bond. Interest is to be paid annually each October 1.

Required

a. Calculate the issue price of the bond assuming a market interest rate of 6% on the date of the bond issue.

b. Using the effective interest method, prepare an amortization schedule similar to Exhibit 14.15.

Exhibit 14.15

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Cash Period Carrying Value $50,000 + (D) $53,036 52,400 51,688 50,891 Premium Interest Interest Paid $50,000 x 14% Unamortized Expense Amort. Period Ending (E) x 12% (A) – (B) Premium $3,036 2,400 1,688 891 Dec. 31/20. Dec. 31/21. $ 7,000 $ 6,364' 6,2882 6,203 6,1093 $ 636 Dec. 31/22 Dec. 31/23 Dec. 31/24. Totals 712 797 891 $3,036 7,000 7,000 -0- 7,000 50,000 $28,000 $24,964