The document discusses bonds issued at a premium by Evermaster Corporation. Specifically: - Evermaster issued $100,000 of 8% term bonds due on January 1, 2025, with semiannual interest payments. Investors required an effective interest rate of 6%. - The present value of the principal is $74,409 and present value of interest payments is $34,121, for total proceeds of $108,530 from the bond sale. This results in an $8,530 premium over the principal amount. - A schedule is provided showing the semiannual amortization of the $8,530 bond premium over the life of the bonds using the effective interest method.

1. Corporation 11
Bonds Issued at a premium
Example:-
Evermaster Corporation issued $100,000 of 8 percent term bonds on January 1, 2020, due on
January 1, 2025, with interest payable each July 1 and January 1.
the investors required an effective-interest rate of 6 percent
solution
Maturity value of bonds payable 100,000
Present value of principle
Principle x P.V. $1 (n=5 i=3%)
100,000 X 0.74409
Present value of interest payable
Interest x P.V.O.A (n=5 i=3%)
(100000 x 8% x 6/12) = 4000 X 8.53020
74.409
34,121
proceeds from sale of bonds 108,530
= Discount on bonds payable 8530
Schedule of Bond Discount Amortization
Effective Interest Method- Semiannual Interest Payments
5 year, 8% bonds to yield 10%
Date Cash
Paid
Interest
Expense
Discount
Amortized
Carrying
amount
of Bonds
1/1/20 92,278
7/1/20 4000a 3256 744 107,786
1/1/21 4000 3234 766 107,020
7/1/21 4000 3211 789 106,231
1/1/22 4000 3162 813 105,418
7/1/22 4000 3137 838 104,580
1/1/23 4000 3112 863 103,717
7/1/23 4000 3085 888 102,829
1/1/24 4000 3187 915 101,914
7/1/24 4000 3057 943 100,971
1/1/25 4000 3029 971 100,000

2. Corporation 12
Masterwear (Issuer) United (Investor)
(Jan. 1) Cash
premium on bonds
Bond payable
108530
8530
100,000
Investment in bonds
premium in bond invest
Cash
100,000
8530
108530
July 1, interest expense
premium on bond
Cash
3256
744
4000
Cash
Premium on bond
invest
interest revenue
4000
744
3256
Dec 1, interest expense
premium on bond
interest payable
3234
766
4,000
Interest receivable
Premium on bond inve
interest revenue
4000
766
3234
Jan. Interest payable
Cash
4,000
4,000
Cash
Interest receivable
4,000
4,000
Maturity Bonds payable
Cash
100,000
100,000
Cash
Investment in bonds
100,000
100,00
0
Example ‫السابقه‬ ‫المسأله‬ ‫علي‬
On January 1, 2023, Masterwear industries called its $100,000, The indenture specified a call price of $105,000.
Bonds Payable
Loss on early extinguishment ‫متمم‬
Premium on bond payable (100,000 – 103,717)
Cash
100,000
1283
3717 105,000

3. Corporation 13
Example
On January 1, 2013, Masterwear industries called its $700,000, 12% bonds when their carrying amount was
$676,288. The indenture specified a call price of $685,000.
The bonds were issued previously at a price yield 14%
Bonds Payable
Loss on early extinguishment ‫متمم‬
Discount on bond payable (700,000 – 676,288)
Cash
700,000
8712
23,712
685,000