Quatro Co. issues bonds dated January 1, 2017, with a par value of $840,000. The
ID: 2605503 • Letter: Q
Question
Quatro Co. issues bonds dated January 1, 2017, with a par value of $840,000. The bonds' annual contract rate is 13%, 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 $860,685. . 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 using the effective interest method to amortize the premium. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Prepare an amortization table for these bonds using the effective interest method to amortize the premium. (Round all amounts to the nearest whole dollar.) Semiannual Cash Interest Bond Interest Premium Unamortized carrying Value Interest Period-End 01/01/2017 06/30/2017 12131/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 Total Paid Expense Amortization Premium Carrying v s 20,685 860,685Explanation / Answer
Answer
Semiannual Interest Period End
Cash Interest paid[D=840000 x 13% x 6/12]
Bond Interest Expense [E = A x 12% x 6/12]
Premium Amortisation [C=D-E]
(F) Unamortised Premium [F=F-C]
(A)Carrying Value [A-C]
01-01-2017
20685
860685
6/30/17
54600
51641
2959
17726
857726
12/31/17
54600
51464
3136
14590
854590
6/30/18
54600
51275
3325
11265
851265
12/31/18
54600
51076
3524
7741
847741
6/30/19
54600
50864
3736
4005
844005
12/31/19
54600
50640
3960
46
840046
Total
327600
306961
20639
Semiannual Interest Period End
Cash Interest paid[D=840000 x 13% x 6/12]
Bond Interest Expense [E = A x 12% x 6/12]
Premium Amortisation [C=D-E]
(F) Unamortised Premium [F=F-C]
(A)Carrying Value [A-C]
01-01-2017
20685
860685
6/30/17
54600
51641
2959
17726
857726
12/31/17
54600
51464
3136
14590
854590
6/30/18
54600
51275
3325
11265
851265
12/31/18
54600
51076
3524
7741
847741
6/30/19
54600
50864
3736
4005
844005
12/31/19
54600
50640
3960
46
840046
Total
327600
306961
20639