Quatro o is es bonds datod January 1, 2018, with a par value o S84000 0. The ba

Question

Quatro o is es bonds datod January 1, 2018, with a par value o S84000 0. The ba s annua contract rate is13%, and intre s paid sam rual um 0 and ecember 31 The ords ma re three years. The annual markot ale at the dak 0 issuance 12 and tha bonds are sold for 60 85. 1. What s the amount of the premium on these bonds at issuanoe? 2. How much total bond interest expense will be recognieed over the lile of theee bonds? lotal repaid 3. Piepare an amorization table for these bonds; use the sraighi-line methed to amortice the premium, [Round your intermeclate calculations to the nearest doller amount) al Priod- Unmorized aluc 0830200 1231/2018 1231/2017 08 30 2018 12312018

Explanation / Answer

Req 1 Issue Price of bonds: 860685 Less: Par value of Bonds 840000 Premium on Bonds payable 20685 Req 2: TOTAL INTEREST OVER LIFE OF BONDS: Amount repaid 6 Interest payment of $ 54,600 327600 (840000*6.5%) Add: par value at maturitty 840,000 Total Amount repaid 1,167,600 Less: Amount borrowed 860685 Interest expense over life 306,915 Req 3: Semi-Annual period end Unamortized Premium Carrying value of Bonds 01.01.2016 20685 860685 30.06.2016 17237.5 857237.5 31.12.2016 13790 853790 30.06.2017 10342.5 850342.5 31.12.2017 6895 846895 30.06.2018 3447.5 843447.5 31.12.2018 0 840000 Note: Amortized premium on each Period: 20685/6 = 3447.50

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