Question

# Tano issues bonds with a par value of \$89,000 on January 1, 2015. The bonds’ annual...

Tano issues bonds with a par value of \$89,000 on January 1, 2015. 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 12%, and the bonds are sold for \$82,439. 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. (Round your intermediate calculations to the nearest dollar amount.)

 1 Discount 6561 =89000-82439 2 Total interest expense over life of bonds 6 payments of \$ 4005 24030 Par value at maturity 89000 Total repaid 113030 Less: Amount borrowed 82439 Total bond interest expense 30591 3 Semiannual Interest period end Unamortized Discount Carrying value 01/01/2015 6561 82439 06/30/2015 5467 83533 12/31/2015 4373 84627 06/30/2016 3279 85721 12/31/2016 2185 86815 06/30/2017 1091 87909 12/31/2017 0 89000

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