Question: Premium Amortization, Struggling with b: Question E7-36: Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1 of the current year, Shields Inc.

Premium Amortization, Struggling with b:

Question E7-36: Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1 of the current year, Shields Inc. issued $1,000,000 of 9%, 20-year bonds for $1,098,964, yielding a market (yield) rate of 8%. Semiannual interest is payable on June 30 and December 31 of each year.

a. Show computations to confirm the bond issue price b. Rate = 6/12 = 0.05 c. Number of payments= 18 d. Payment = 1,000,000*9%*6/12 = -$4500 e. Future value = - $1,000,000 f. Bond issue price = $1,098,964

b. Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and premium amortization on June 30 of the current year, and (3) semiannual interest payment and premium amortization on December 31 of the current year

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