P$10-10$

LO$10-5$

Preparing a Bond Amortization Schedule for a Bond Issued at a Premium $(\backslash$$$10-10)$

On January $1$ of this year, Olive Corporation issued bonds. Interest is payable once a year on December $31.$ The bonds mature at the end of four years. Olive uses the effective$-$interest amortization method. The partially completed amortization schedule below pertains to the bonds:

Required:

$1.$ Complete the amortization schedule.

$2.$ When the bonds mature at the end of $\backslash (20\backslash$times $4\backslash ),$ what amount of principal will Olive pay investors?

$3.$ How much cash was received on the day the bonds were issued $($sold$)?$

$4.$ Were the bonds issued at a premium or a discount? If so$,$ what was the amount of the premium or discount?

$5.$ How much cash will be disbursed for interest each period and in total over the life of the bonds?

$6.$ What is the coupon rate?

$7.$ What was the annual market rate of interest on the date the bonds were issued?

$8.$ What amount of interest expense will be reported on the income statement for $\backslash (20\backslash$times $2\backslash )$ and $\backslash (20\backslash$times $3\backslash )?$

$9.$ What amount will be reported on the balance sheet for bonds payable at the end of $\backslash (20\backslash$times $2\backslash )$ and $\backslash (20\backslash$times $3\backslash )?$