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Calculate the effective interest rate

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Question - Term Bond - Premium - Company A issued a 5 year, $100,000, 5% bond on Jan. 1, 2010. Interest is payable each December 31. The bond sold for 101. The issue costs were $700. The issue costs are merged with any discount or premium to calculate a single effective interest rate. 40% of the bonds are retired on January 1, 2013 at 102.

Calculate the effective interest rate. Make all needed entries on December 31, 2010, December 31, 2011, January 1, 2013 (retirement) and December 31, 2013. Include an amortization table for all years.

Fair Value Option - assume the interest rate is 4.5% on December 31, 2010, make all required entries under this option.

Reference no: EM133053165

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