| Course | AC301 Intermediate Accounting II |
|---|---|
| Unit | Unit 4 |
| Paper type | Bond amortization schedule |
| Length | About 630 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC301 Unit 4
Paying 7 Percent When the Market Asks 6: A Unit 4 Bond Amortization Schedule for a Toll Road Company
[Student Name]
Purdue University Global
AC301: Intermediate Accounting II
Unit 4 Bond Amortization Schedule
[Instructor Name]
[Date]
Granite Pass Toll Road Company and its bond issue are composite; the present value factors are exact, and the opinion, update and textbook cited are real.
Term Sheet
1. Face value: $1,000,000, issued January 1 to resurface a bridge approach.
2. Stated rate: 7 percent a year, paid June 30 and December 31, $35,000 each period.
3. Term: four years, eight periods.
4. Market yield at issue: 6 percent a year, 3 percent a period.
Pricing
Present value of the face at 3 percent for eight periods: $1,000,000 times 0.78941, $789,409. Present value of the interest: $35,000 times the annuity factor 7.01969, $245,689. Issue price: $1,035,098. Premium: $35,098.
Investors pay the premium because each coupon is $5,000 above what the market rate would produce; the premium is the present value of that extra interest.
Entry, January 1: Cash, debit $1,035,098; Bonds Payable, credit $1,000,000; Premium on Bonds Payable, credit $35,098.
Effective Interest Schedule
Each row shows the period, interest expense at 3 percent of the opening carrying amount, premium amortized (cash of $35,000 less expense), and the closing carrying amount.
1. Period 1: expense $31,053; amortized $3,947; carrying amount $1,031,151.
2. Period 2: expense $30,935; amortized $4,065; carrying amount $1,027,086.
3. Period 3: expense $30,813; amortized $4,187; carrying amount $1,022,899.
4. Period 4: expense $30,687; amortized $4,313; carrying amount $1,018,586.
5. Period 5: expense $30,558; amortized $4,442; carrying amount $1,014,144.
6. Period 6: expense $30,424; amortized $4,576; carrying amount $1,009,568.
7. Period 7: expense $30,287; amortized $4,713; carrying amount $1,004,855.
8. Period 8: expense $30,145; amortized $4,855; carrying amount $1,000,000.
Totals: expense $244,902; amortized $35,098. Period 8 includes a one-dollar rounding adjustment so the bonds reach face exactly at maturity.
Entry, June 30, Year 1: Interest Expense, debit $31,053; Premium on Bonds Payable, debit $3,947; Cash, credit $35,000.
Interest expense falls every period because Granite Pass owes a shrinking carrying amount; the cash coupon stays at $35,000, so the part of each coupon that is really a return of the premium grows.
The Straight-Line Alternative
Straight-line spreads the premium evenly: $35,098 divided by 8, $4,387 a period, so expense is $30,613 every period. Compared with the effective method, straight-line expense is $440 lower in Period 1, the gap shrinks to $74 by Period 4, and then it reverses, reaching $468 higher in Period 8. Over the four years both methods report the same $244,902 of total expense.
The effective interest method is required because it reports a constant rate on the debt actually outstanding. The simpler straight-line pattern may be used only if it produces figures close enough to the interest method that no reader would be misled (Accounting Principles Board, 1971). For a $35,098 premium, the differences here are small, and a grader would accept either only if the problem allowed it.
Presentation
On the December 31, Year 1, balance sheet, the bonds are reported at $1,027,086, face plus the unamortized premium. Had Granite Pass paid underwriting costs, they would have been deducted from that carrying amount and amortized through interest as well (Financial Accounting Standards Board, 2015). The notes disclose the stated rate, maturity and the effective rate of 6 percent.
What the Premium Means
The premium does not make the debt cheaper or dearer than the market. Granite Pass borrows at the 6 percent investors demanded, delivered through a higher coupon and a higher price. The schedule makes that visible: expense as a share of the carrying amount stays at 3 percent per period, while the coupon stays at 3.5 percent of face (Kieso et al., 2019).
References
Accounting Principles Board. (1971). Interest on receivables and payables (APB Opinion No. 21). American Institute of Certified Public Accountants.
Financial Accounting Standards Board. (2015). Interest, imputation of interest (Subtopic 835-30): Simplifying the presentation of debt issuance costs (Accounting Standards Update No. 2015-03). https://www.fasb.org
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
AC301 Unit 4 instructions, in plain terms
Unit 4 in AC301 asks for a bond's issue price and an amortization schedule, sometimes with a comparison of methods. Set out the term sheet first: face, stated rate, payment dates, term and market yield. Price the bond as the present value of the face plus the present value of the coupons, using the periodic rate and number of periods. Record the issue. Give each row four figures: the coupon paid, expense found by applying the yield to what was owed when the period began, the premium written off as the gap between those two, and the balance left. Show at least one interest entry. Absorb rounding in the last period so the bond reaches face. If the prompt asks, compute straight-line figures and explain when they may be used. Finish with the balance sheet amount at a year end and a sentence on what the premium means. Cite APB 21 and the textbook in APA 7.
Inside the AC301 Unit 4 example
The sample begins with a four-line term sheet for bonds issued to resurface a bridge approach. The pricing section multiplies the face by 0.78941 and the $35,000 coupon by 7.01969, giving $1,035,098, and explains the premium as the value of the extra coupon. The issue entry follows. Eight numbered rows show expense falling from $31,053 to $30,145 and the carrying amount reaching face, with a one-dollar adjustment in the last row. The first interest entry is shown. The highlighted sentence explains why expense falls while the coupon stays fixed. A straight-line section gives $4,387 of amortization each period and traces the difference from $440 to minus $468. Presentation reports $1,027,086 at the end of Year 1 and notes how issue costs would be handled. A closing section ties the schedule to a constant 6 percent cost.
AC301 Unit 4 rubric: what earns full points
AC301 bond schedules are graded first on the price, because an error there runs through every row. The periodic rate and number of periods must match the payment frequency. Every row is checked to see that the yield was applied to the balance owed when the period opened, not to the $1,000,000 face. Amortization must equal the difference between cash and expense, and the carrying amount must close at face. The issue and interest entries earn their own points. Straight-line comparisons, when assigned, are credited for correct figures and for stating the materiality condition that permits them. Presentation of the carrying amount at a balance sheet date shows the link to the statements. An explanation of what the premium means for the cost of borrowing earns the analysis points. Labeled columns or rows, and APA 7 references to APB 21 and the 2015 update, complete what Purdue Global instructors look for.
AC301 Unit 4 help from the desk
Bond problems slip most often at pricing, when students use the annual rate with semiannual periods or the stated rate instead of the market rate. Others apply the yield to the $1,000,000 face every period, so expense never changes and the schedule quietly becomes straight-line. A premium is sometimes added to interest expense rather than subtracted from it. Schedules fail to reach face because of rounding, and the last row is left unadjusted. Some students record the premium as revenue at issue. Straight-line is used without a word on materiality. Papers also forget to show where the bonds appear on the balance sheet. If your problem involves a discount, bonds issued between interest dates or issue costs, our accountants can build the full schedule and entries for the figures your instructor gave.
Get an AC301 Unit 4 example written to your instructions
Market and stated rates, face value, maturity and interest dates from Unit 4 fix the whole table. Mention whether the instructions want a straight-line comparison, attach the rubric, and the balanced schedule arrives with its entries and balance sheet line within 24-48h, at no charge for a first custom sample. 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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AC301 Unit 4 questions, answered
When is straight-line amortization acceptable?
Only when its results are not materially different from effective interest amortization. The standard treats effective interest as the required approach and allows the simpler one as a practical exception. This sample's variance column shows differences of a few hundred dollars per period on a million-dollar issue, which many problems would treat as immaterial, but the course usually wants the effective method shown regardless.
Where do bond issue costs go in this schedule?
Under the current rule, issue costs reduce the carrying amount of the debt, much as a discount does, rather than sitting on the balance sheet as a separate asset. They are then amortized as part of interest expense over the life of the bonds. Some AC301 problems include them and require a recomputed effective rate; the sample adds that step when the facts provide the costs.
Why does the schedule need a rounding adjustment in the last row?
Because each row rounds expense to the dollar, and eight rounded figures rarely sum exactly to the premium. Here the carrying amount would finish one dollar above face without an adjustment. The sample absorbs the difference in the final period's expense and labels it, which graders accept; an unlabeled adjustment, or a final balance left off face, tends to cost a point.
Where can I find a free AC301 Unit 4 sample paper?
This page provides a complete AC301 Unit 4 bond amortization schedule for a composite toll road company's premium issue, with pricing, eight effective interest rows, a straight-line comparison and APA 7 references.
Why does interest expense fall each period in the AC301 Unit 4 schedule?
Expense is 3 percent of what Granite Pass owes at the start of each period, and that carrying amount shrinks as the premium is amortized. The $35,000 coupon never changes.