Tano issues bonds with a par value of $80,000 on January 1, 2017. The bonds, ann
ID: 2596250 • Letter: T
Question
Tano issues bonds with a par value of $80,000 on January 1, 2017. The bonds, annual contract rate is 8%, 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 10%, and the bonds are sold for $75,938. 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. Complete this question by entering your answers in the tabs below. Required Required Required What is the amount of the discount on these bonds at issuance? 1 2 3 DiscountExplanation / Answer
$ 1 Par value of the bond 80,000 Less: Sale value of the bond (75,938) Discount on bond at issuance 4,062 Semi annual interest rate = 8% x 6/12 = 4% Semi anuual market rate = 10% x6/12 = 5% Bond amortization table Period Coupon payment at 8% Interest expenses at 10% Amortization of bond discount Unamortized balance of discount Credit balance in Bond payable account Book Value of the note payable {1} {2} = { 6 x 4% } {3} = { 7 x 5% } {4} = {3-2} {5} {6} { 7 } = { 6 - 5} January 1 ,2017 4,062 80,000 75,938 June 30 ,2017 3,200 3,797 597 3,465 80,000 76,535 January 1 ,2018 3,200 3,827 627 2,838 80,000 77,162 June 30 ,2018 3,200 3,858 658 2,180 80,000 77,820 January 1 ,2019 3,200 3,891 691 1,489 80,000 78,511 June 30 ,2019 3,200 3,926 726 764 80,000 79,236 January 1 ,2020 3,200 3,962 764 (0) 80,000 80,000 Total interest 23,260
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