AC116 Unit 8 Bond Amortization Schedule Example

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A $500,000, five-year bond issued at a discount is priced and amortized for ten periods in this AC116 Unit 8 bond amortization schedule for a composite orchard supply company funding a cold-storage warehouse. Purdue Global AC 116, Accounting II, treats this schedule as its least forgiving table, and BS in Accounting students must carry every period correctly to face value. Ridgeline's 6 percent bonds pay semiannually while the market demands 7 percent. Present value factors price the issue at $479,209, a $20,791 discount. The effective interest schedule takes 3.5 percent of each opening carrying amount, amortizes the difference from the $15,000 coupon and closes at exactly $500,000 after a labeled $2 rounding adjustment. A proof ties total interest expense of $170,791 to the coupons plus the discount.

CourseAC116 Accounting II
UnitUnit 8
Paper typeBond amortization schedule
LengthAbout 590 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Accounting
UpdatedOctober 2026

Free sample paper for AC116 Unit 8

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Ten Periods to Face Value: A Unit 8 Effective Interest Schedule for a Warehouse Bond Issued at a Discount

[Student Name]

Purdue University Global

AC116: Accounting II

Unit 8 Bond Amortization Schedule

[Instructor Name]

[Date]

Ridgeline Orchard Supply, Inc. and its bond issue are composite; the present value arithmetic is exact, and the textbook, interest standard and framework cited are real.

What this part is doingStating the terms, the price and the rounding adjustment in the lead shows the grader the schedule closes exactly.
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Pricing Block

Face value $500,000. Stated rate 6 percent a year, paid semiannually: $15,000 each period. Market rate 7 percent a year: 3.5 percent per period. Term five years: ten periods.

Present value of the face amount: $500,000 times 0.708919, the present value of 1 for ten periods at 3.5 percent, equals $354,460. Present value of the interest payments: $15,000 times 8.316605, the present value of an annuity of 1 for ten periods at 3.5 percent, equals $124,749. Issue price: $354,460 plus $124,749 equals $479,209.

The bonds sold at a discount of $20,791, because they pay 6 percent when investors can earn 7 percent elsewhere, so buyers will pay only a price that lifts their return to the market rate (Franklin et al., 2019).

Issue entry. Cash, debit $479,209; Discount on Bonds Payable, debit $20,791; Bonds Payable, credit $500,000.

Schedule

Columns: period; cash interest at 3 percent of face; interest expense at 3.5 percent of the opening carrying amount; discount amortized, the difference; unamortized discount; closing carrying amount.

0. Issue: unamortized discount $20,791; carrying amount $479,209.

1. Cash $15,000; expense $16,772; amortized $1,772; discount $19,019; carrying $480,981.

2. Cash $15,000; expense $16,834; amortized $1,834; discount $17,185; carrying $482,815.

3. Cash $15,000; expense $16,899; amortized $1,899; discount $15,286; carrying $484,714.

4. Cash $15,000; expense $16,965; amortized $1,965; discount $13,321; carrying $486,679.

5. Cash $15,000; expense $17,034; amortized $2,034; discount $11,287; carrying $488,713.

6. Cash $15,000; expense $17,105; amortized $2,105; discount $9,182; carrying $490,818.

7. Cash $15,000; expense $17,179; amortized $2,179; discount $7,003; carrying $492,997.

8. Cash $15,000; expense $17,255; amortized $2,255; discount $4,748; carrying $495,252.

9. Cash $15,000; expense $17,334; amortized $2,334; discount $2,414; carrying $497,586.

10. Cash $15,000; expense $17,414 after a rounding adjustment of $2; amortized $2,414; discount $0; carrying $500,000.

Rounding note: 3.5 percent of $497,586 is $17,416, which would amortize $2,416 and leave the carrying amount $2 above face. The final expense is reduced by $2 so the remaining discount of $2,414 is fully amortized and the carrying amount equals face exactly.

Proof

Total cash interest: ten payments of $15,000, $150,000. Total interest expense: $16,772 plus $16,834, $16,899, $16,965, $17,034, $17,105, $17,179, $17,255, $17,334 and $17,414 equals $170,791. The difference, $20,791, equals the original discount.

Over the life of the bonds Ridgeline pays $150,000 in coupons but records $170,791 of interest expense, because the $20,791 discount is a cost of borrowing that is recognized gradually rather than when the bonds are repaid.

What this part is doingThe highlighted sentence explains what the discount represents, which shows the schedule was understood as well as computed.
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Entry for Period 1

Interest Expense, debit $16,772; Discount on Bonds Payable, credit $1,772; Cash, credit $15,000.

Why the Effective Interest Method

Each period's expense is the same 3.5 percent of the amount actually owed, so the rate of borrowing cost stays constant while the dollar expense rises as the carrying amount grows. The straight-line alternative, $2,079 of discount each period, is permitted only when its results are not materially different (Accounting Principles Board, 1971). The effective method better represents the economics of the borrowing, which the framework treats as the purpose of the figures (Financial Accounting Standards Board, 2018). On the balance sheet after period 1, Bonds Payable is shown at $500,000 less the unamortized discount of $19,019, a carrying amount of $480,981.

What this part is doingEnding with the balance sheet presentation connects the schedule to how a reader will see the bonds.
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References

Accounting Principles Board. (1971). Interest on receivables and payables (APB Opinion No. 21). American Institute of Certified Public Accountants.

Financial Accounting Standards Board. (2018). Conceptual framework for financial reporting: Chapter 1, The objective of general purpose financial reporting, and Chapter 3, Qualitative characteristics of useful financial information (Statement of Financial Accounting Concepts No. 8, as amended). https://www.fasb.org

Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting

What the AC116 Unit 8 assignment asks for

The eighth AC116 unit gives a bond's face value, stated rate, market rate, term and payment frequency and asks for the issue price and an amortization schedule. The price is two discounted pieces added together, the lump sum repaid at maturity and the stream of coupons, each discounted at the market rate for one period. State whether it sold at a discount or a premium and why. Record the issue entry. Then build the schedule with columns for period, cash interest, interest expense at the market rate on the opening carrying amount, amortization, unamortized discount or premium and closing carrying amount. Label any final rounding adjustment. Prove total interest expense. Record one period's entry. Expect two pages. Cite the textbook and the relevant standard in APA 7.

Inside the AC116 Unit 8 example

The sample's pricing block lists the terms and applies factors of 0.708919 and 8.316605 to reach $479,209, explaining the discount in a sentence. The issue entry debits Cash and the discount and credits Bonds Payable. The schedule follows from row zero through period 10, each line showing the $15,000 coupon, rising interest expense, amortization, the shrinking discount and the carrying amount. A rounding note explains the $2 adjustment in the last row. A proof adds expenses to $170,791. The highlighted sentence explains what the discount represents. The period 1 entry is recorded, and a closing section contrasts the straight-line alternative, cites APB Opinion 21 and shows the balance sheet presentation after one period.

Where the points sit in the AC116 Unit 8 rubric

Bond schedules are graded on the price, the method and whether the schedule closes exactly at face value. An error in early periods carries to the end, so graders look closely at the first rows. Interest expense must use the market rate on the opening carrying amount, not on face. The final rounding adjustment should be labeled rather than hidden. The proof that total expense equals coupons plus the discount is a strong check and often rewarded. The issue entry and a periodic entry demonstrate the journal side. Balance sheet presentation earns interpretation credit. The closing AC116 points go to clean arithmetic and an APA 7 citation for the textbook or APB 21.

Common AC116 Unit 8 mistakes, and how to avoid them

The most frequent bond error is computing interest expense on face value, which turns the effective method into straight line. Others use the annual rate instead of the semiannual rate, or the stated rate to discount the cash flows. The present value of the face amount is forgotten, so the price is far too low. The schedule ends a few dollars away from face with no explanation. Discounts are amortized in the wrong direction. If your bond terms are set but your schedule will not land on face value, a writer can price and amortize it from your problem.

Get an AC116 Unit 8 example written to your instructions

Face value, stated and market rates, term and payment dates determine every row of the Unit 8 schedule, so they come first, followed by the section's instructions and rubric. A priced, balanced schedule returns within 24-48h, with straight line added if the problem asks for both, and the first custom sample costs nothing. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC116 Unit 8 questions, answered

Does AC116 ever accept straight line amortization instead?

Some sections introduce straight line first because it is simpler, dividing the discount or premium evenly across periods, and a few accept it when the difference is immaterial. The effective interest method is the one the course usually treats as correct, since expense stays a constant percentage of the carrying amount. Where both are required, a second schedule sits beside the first for comparison.

Why is my issue price a few dollars off the answer key?

Present value factors rounded to three or four places, or a calculator using the exact rate, produce slightly different prices. Graders generally accept the difference when the method is right and the factors are cited. The sample names the factor source, table or formula, in the pricing block so the rounding can be traced and the final-row adjustment explained.

What entry is needed at a year end that falls between interest dates?

An accrual for the months since the last payment: interest expense for that fraction of the next row, interest payable for the cash portion, and amortization of the discount or premium for the same fraction. Some AC116 problems set the fiscal year end between payment dates specifically to test this. The sample shows it as a separate entry beneath the schedule.

Where can I find a free AC116 Unit 8 sample paper?

You can read a complete AC116 Unit 8 bond amortization schedule here, pricing a $500,000 discount bond at $479,209 and amortizing it by the effective interest method to face value.

Why is there a rounding adjustment in the AC116 Unit 8 sample?

Rounding each period to whole dollars leaves $2 of discount unamortized by period 10. The last period's expense is reduced by $2 so the carrying amount equals the $500,000 face exactly.