On January 1, 2016, Relo Company issued $490,000 of bonds at an issue price of $

Question

On January 1, 2016, Relo Company issued $490,000 of bonds at an issue price of $495,000. The bonds mature in 5 years, have a stated interest rate of 6%, and pay interest semi annually on June 30, and December 31 of each year. How much cash will be paid at each semiannual interest payment? $ How much of the premium will be amortized at each interest payment date? $ How much interest expense will be recognized at each interest payment date? $ What will be the total interest paid over the life of the bond?$

Explanation / Answer

Cash paid at each semiannual interest payment $    14,700 =490000*6%/2 Premium amortized at each interest payment date $          500 =(495000-490000)/(5*2) Interest expense recognised at each interest payment date $    14,200 =14700-500 Total interest paid over the life of the bond $ 147,000 =490000*6%*5

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