Straight-line amortization of bond discount L O P2 Sears issues bonds with a par
ID: 2435262 • Letter: S
Question
Straight-line amortization of bond discount L O P2 Sears issues bonds with a par value of $175,000 on January 1, 2009. The bonds' annual contract rate is 4%, 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 6%, and the bonds are sold for $165,523. Required: What is the amount of the discount on these bonds at issuance? (Omit the "$" sign in your response.) How much total bond interest expense will be recognized over the life of these bonds? (Omit the "$" sign in your response.) Use the straight-line method to amortize the discount for these bonds Wee the one in (Make sure that the unamortized discount Is adjusted to "0" in the last period. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)Explanation / Answer
1 Market Value of Bonds 165523 Discount 9477 2 Total Bond Interest Expense 165523 * 0.06*6 / 12 4965.69 3.Period Semi Annual Amortized Unamortized Carrying period End Discount Discount Value 0 1/1/2009 9477 165523 1 6/30/2009 1,579.50 7,897.50 167,102.50 2 12/31/2009 1,579.50 6,318.00 168,682.00 3 6/30/2010 1,579.50 4,738.50 170,261.50 4 12/31/2010 1,579.50 3,159.00 171,841.00 5 6/30/2010 1,579.50 1,579.50 173,420.50 6 12/3/2010 1,579.50 0.00 175,000.00