Tano issues bonds with a par value of $83,000 on January 1, 2017. The bonds’ ann

Question

Tano issues bonds with a par value of $83,000 on January 1, 2017. 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 $78,922.
  
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 straight-line method to amortize the discount for these bonds.

Explanation / Answer

1.the amount of the discount on these bonds at issuance

face value - issue price=83000-78922

=4078

2. total bond interest expense will be recognized over the life of these bonds

3. amortization table using the straight-line method to amortize the discount for these bonds

note:discount amortised on bond (SLM)=4078/6periods

? =680

particulars amount$ bond value at meturity 83000 intrest payable (83000*10%*6/12)*6periods 24900 total amount payable 107900 less:amount recived from bond holders (78922) total intrest expense 28978

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