Tano issues bonds with a par value of $83,000 on January 1,
2017. The bonds’ annual contract rate is 10%, 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 $78,922.
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.
|Par value of bonds||83000|
|Less: Issue price||78922|
|6 payments of 4150||24900|
|Add: Maturity value||83000|
|Less: Amount borrowed||78922|
|Total Interest expense||28978|
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