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Effective interest method for amortizing bond discounts

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On January 2, Year 1 the Lyndhurst Company, Inc. a privately-held company, issued $1,000,000, five-year, 10.00% bonds, dated January 2, Year 1. The bonds provided for semi-annual interest payments to be made on June 30 and December 31 of each year. Terms of the bond indenture allowed the company to call the bonds at 102 after one year. The bonds were issued when the market interest rate was 8.00%.

Lyndhurst Company, Inc. uses the effective interest method for amortizing bond discounts and premiums.

The bonds are term bonds that mature on December 31, Year 5.

Lyndhurst Company, Inc.'s fiscal year for financial reporting purposes is December 31.

Reference no: EM13762654

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