Chapber 10 Homeworlk xD table b 3pg (362 580) xD table b.1 09 (860-56 Homework S

Question

Chapber 10 Homeworlk xD table b 3pg (362 580) xD table b.1 09 (860-56 Homework Saved Quatro Co. Issues bonds dated January 1, 2017, with a par value of $870.000. The bonds' annual contract rate is 8%, and the bonds are sold for S892789. 1. What is the amount of the premium on these bonds at issuance? paild semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the The annual market rate at the date of issuance is 2. How muc h total bond Interest expense will be recognized over the life of these bonds? 0 3. Prepare an amortization table for these bonds using the effective interest method to amortize the premium Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 How much total bond interest expense will be recognized over the life of these bonds? Amount repaid payments of Par value at maturity Total repaid Less amound bomowed Total bond enterest expense C Required 1 Required 3 8 8 3

Explanation / Answer

SOLUTION

(A) Premium on bonds = Issue price - par value

= $892,789 - $870,000 = $22,789

(B)

(C)

* round off (Adjusted with 17)

Particulars Amount ($) Amount repaid- Six payments of 39,150($870,000 * 9% * 1/2) 234,900 Par value at maturity 870,000 Total repaid 1,104,900 Less: Amount borrowed (892,789) Total bond interest expense 212,111

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