Question

# Stanford issues bonds dated January 1, 2017, with a par value of \$240,000. The bonds’ annual...

Stanford issues bonds dated January 1, 2017, with a par value of \$240,000. 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 \$222,307.

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 effective interest method to amortize the discount for these bonds.

1. Bond discount = \$240,000 - \$222,307

= \$17,693

2. Total interest expense = \$17,693 + (\$240,000 * 4.5% * 6)

= \$82,493

3.

 Period Effective interest @ 6% of carrying value Interest paid @ 4.5% of \$240,000 Plug for discount amortization Bonds carrying value 0 \$222,307 1 \$13,338.42 (\$222,307*6%) \$10,800 \$2,538.42 224,845.42 2 \$13,490.73 (\$224,845.42*6%) \$10,800 \$2,690.73 \$227,536.15 3 \$13,652.17 (\$227,536.15*6%) \$10,800 \$2,852.17 \$230,388.32 4 \$13,823.30 (\$230,388.32*6%) \$10,800 \$3,023.3 \$233,411.62 5 \$14,004.70 (\$233,411.62*6%) \$10,800 \$3,204.7 \$236,616.32 6 \$14,196.98 (\$236,616.32*6%) \$10,800 \$3,396.98 \$240,013.3

* The difference of \$13.3 is due to rounding off

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.

##### Active Questions
• FBC(Pty) manufactures one product, Product X. You were given the following information for period 4. Product...
• Briefly describe the sensory and/or motor symptoms you might experience after an injury to each of...
• In contrast to excitatory postsynaptic potentials, inhibitory postsynaptic potentials… a. Involve changes in ion flow across...
• A wave on a string has a displacement according to the equation: y(x,t) = 25.0 cm...
• You are the president of high performing division and the Chief Executive Officer tells you in...