6 Stanford issues bonds dated January 1, 2017, with a par value of $251,000. The

Question

6 Stanford issues bonds dated January 1, 2017, with a par value of $251,000. The bonds' annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31, The bonds mature in three years. The annual market rate at the date of issuance is 12 and the bonds are sold for $238.667 1. What is the amount of the discount on these bonds at issuance? 2 How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an amortization table using the effective interest method to amortize the discount for these bonds 4.28 points 0139-16 Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 eBook What is the amount of the discount on these bonds at issuance? Required 2

Explanation / Answer

Solution 1:

Amount of discount on bonds = Par value - Issue price

= $251,000 - $238,667 = $12,333

Solution 2:

Solution 3:

Total bond interest expense over the life of bond Particulars Amount Amount Repaid: 6 semiannual interest payments of $12,550 each $75,300.00 Par Value at Maturity $251,000.00 Total Repaid $326,300.00 Less: Amount borrowed $238,667.00 Total bond interest expense $87,633.00

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