Question

# Quatro Co. issues bonds dated January 1, 2019, with a par value of \$830,000. The bonds’...

Quatro Co. issues bonds dated January 1, 2019, with a par value of \$830,000. The bonds’ annual contract rate is 9%, 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 \$851,741.

1. What is the amount of the premium on these bonds at issuance?
2. How much total bond interest expense will be recognized over the life of these bonds?
3. Prepare an effective interest amortization table for these bonds.

• Required 1
• Required 2
• Required 3

Prepare an effective interest amortization table for these bonds. (Round all amounts to the nearest whole dollar.)

 Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value 01/01/2019 \$21,741 \$851,741 06/30/2019 18,118 848,118 12/31/2019 14,494 844,494 06/30/2020 10,871 844,494 12/31/2020 7,247 844,494 06/30/2021 3,624 844,494 12/31/2021 14,494 0 830,000 Total

 1 Premium 21741 =851741-830000 2 Total bond interest expense over life of bonds: Amount repaid: 6 payments of \$37350 224100 Par value at maturity 830000 Total repaid 1054100 Less amount borrowed 851741 Total bond interest expense 202359 3 Semiannual Interest Period­End Cash Interest Paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value 01/01/2019 21741 851741 06/30/2019 37350 34070 3280 18461 848461 12/31/2019 37350 33938 3412 15049 845049 06/30/2020 37350 33802 3548 11501 841501 12/31/2020 37350 33660 3690 7811 837811 06/30/2021 37350 33512 3838 3973 833973 12/31/2021 37350 33377 3973 0 830000 Total 224100 202359 21741