Question

# Quatro Co. issues bonds dated January 1, 2018, with a par value of \$730,000. The bonds’...

Quatro Co. issues bonds dated January 1, 2018, with a par value of \$730,000. The bonds’ annual contract rate is 12%, 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 \$767,042.

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 amortization table for these bonds; use the straight-line method to amortize the premium.

Quatro Co. issues bonds dated January 1, 2018, with a par value of \$730,000. The bonds’ annual contract rate is 12%, 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 \$767,042.

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 amortization table for these bonds; use the straight-line method to amortize the premium. (Round your intermediate calculations to the nearest dollar amount.)

1) Premium on bonds payable = 767042-730000 = 37042

2) Bond interest expense

 Amount repaid 6 Payment of 43800 262800 Par value of maturity 730000 Total repayment 992800 Less: Amount borrowed -767042 Total bond interest expense 225758

3) Amortization table

 Unamortized premium Carrying value Jan 1,2018 767042 June 30,2018 37042-6174 = 30868 760868 Dec 31,2018 30868-6174 = 24694 754694 June 30,2019 24694-6174 = 18520 748520 Dec 31,2019 18520-6174 = 12346 742346 June 30,2020 6172 736172 Dec 31,2020 0 730000

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