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.)

Homework Answers

Answer #1
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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