Question

Exercise 14-7 Straight-Line: Amortization of bond premium LO P3 10 points Quatro Co. issues bonds dated January 1, 2017, with a par value of $700,000. 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 $717,237 1. 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, use the straight-line method to amortize the premium eBook t2 Hint Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Print What is the amount of the premium d these bonds at issuance? Referencers Required 2>

Answer 1

	in $
Ans 1 Premium on bonds is
Issue Price-Par value
717237-700000	17237
ans 2
The periof is 3*2=6
Interest payment=700000*6.5%*6	273000
Par value	700000
Total amt to be repiad	973000
Less: Amt borrowed	717237
Total interest expenses	255763
ans 3
Period	Unamortied premium	Carrying value
1/1/2017	17237	717237
6/30/2017	14364	714364
	(17237-2873)	(717237-2873)
12/31/2017	11491	711491
	(14364-2873)	(714364-2873)
6/30/2018	8618	708618
12/31/2018	5745	705745
6/30/2019	2872	702872
12/31/2019	0	700000
Premium amortized per period
17237/6	2873
If any doubt please comment