Enviro Company issues annual market rate for these bonds expense 1100%, 10-year

Question

Enviro Company issues annual market rate for these bonds expense 1100%, 10-year bonds with a par value of $440,000 ad semiannual interest payments. Onthe issue date, the is 800%, which implies a soling price of 128 18. The straight-line method is used to allocate interest 1. Using the implied seling price of 128 1,/8. what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? Amount repaid payments of Par value at maturity Total repayments Less amount borrowed (from part 1) Total bond interest expense 3. What is the amount of bond interest expense recorded on the irst interest payment date? Hints References Worksheet Oifticulty. 2 Medium Learning Objective: 10-P3 Compute and record amortization of a bond premium using the straight-line 3/27/20

Explanation / Answer

1 Cash proceeds=440000*128.125/100 = $563750 2 Amount repaid: 20 payments of $24200 484000 Par value at maturity 440000 Total repayments 924000 Less amount borrowed 563750 Total bond interest expense 360250 3 Bond interest expense=24200-(563750-440000)/20= $18013 or $18012.50

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