Tano issues bonds with a par value of $81,000 on January 1, 2013. The bonds’ ann
ID: 2483357 • Letter: T
Question
Tano issues bonds with a par value of $81,000 on January 1, 2013. The bonds’ annual contract rate is 6%, 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 8%, and the bonds are sold for $76,753.
What is the amount of the discount on these bonds at issuance?
How much total bond interest expense will be recognized over the life of these bonds?
Use the straight-line method to amortize the discount for these bonds.
1.What is the amount of the discount on these bonds at issuance?
Explanation / Answer
Tano Details Amt $ Bond Facce value 81,000 Bond Issue value 76,753 Bond Discount 4,247 Years to maturity 3 Discount amortization by SL method per six months 707.83 Interest payable per six months @3% 2,430.00 3 Bond Amortization Schedule Period Interest Payable Discount Amortized Interest Expense Unamortized discount Bond Face Value Bond Carrying Value Jan 1.2013. 4,247 81,000 76,753 June 1.2013. 2,430 707.83 3,137.83 3,539.17 81,000 77,461 Dec 31.2013. 2,430 707.83 3,137.83 2,831.34 81,000 78,169 June 1.2014. 2,430 707.83 3,137.83 2,123.51 81,000 78,876 DEc 31.2014. 2,430 707.83 3,137.83 1,415.68 81,000 79,584 June 1.2015. 2,430 707.83 3,137.83 707.85 81,000 80,292 Dec 31.2015. 2,430 707.83 3,137.83 0.02 81,000 81,000 18,826.98 1 Amount of bond discount on issuance = $ 4,247.00 2 Total Interest expense recognized over bond life= $ 18,826.98
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