Question

1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a face value of $81,000. The bonds are sold for $78,570. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31.

2. The Marx Company issued $88,000 of 12% bonds on April 1 of the current year at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, and mature in five years, on January 1. Determine the total interest expense related to these bonds for the current year ending on December 31.

3. On January 1, the Kings Corporation issued 10% bonds with a face value of $105,000. The bonds are sold for $102,900. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Kings records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31 of the first year is.

Answer 1

1) 9% Bonds Face Value $81,000
a) Face Value		$ 81,000
b) Issue Price		$ 78,570
c) Discount on issue of bond	[a-b]	$ 2,430
d) Maturity Period		5 years
e) Amortization cost	[c/d]	$486
f) Interest for the year	$81,000*9%	$ 7,290
g) Total interest expenses for the year	[e+f]	$ 7,776

2) 12% Bonds Face Value $88,000
a) Face Value		$ 88,000
b) Issue Date		April 1
c) Interest expense for the current year	$88,000*12%*9/12	$ 7,920

3) 10% Bonds Face Value $105,000
a) Face Value		$ 105,000
b) Issue Price		$ 102,900
c) Discount on issue of bond	[a-b]	$ 2,100
d) Maturity Period		10 years
e) Amortization cost	[c/d]	$ 210
f) Interest for the year	$105,000*10%	$ 10,500
g) Total interest expenses for the year	[e+f]	$ 10,710