Question

Chapter 10 Homework i Saved Quatro Co. issues bonds dated January 1, 2018, with a par value of $770,000. The bonds' annual contract rate is 12%, 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 10%, and the bonds are sold for $809,071. points 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 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the amount of the premium on these bonds at issuance? Print Premium References Required 1 Required 2 >

Answer 1

1)	Premium on bonds
	Bonds issue price			809,071
	bonds face value			770,000
	premium on bonds			39,071	answer
2)	total Bond interest expense over life of bonds
	Amount repaid
	6	payments of		46200	277200
		par value at maturity			770,000
	total repaid				1047200
	less amount borrowed				809,071
	total bond interest expense.				238,129
3)	premium amortized =39071/6
			6512
	period	unamortized	Carrying
		premium	value
	1/1/2018	39,071	809,071
	6/30/2018	32,559	802,559
	12/31/2018	26,047	796,047
	6/30/2019	19,536	789,536
	12/31/2019	13,024	783,024
	6/30/2020	6,512	776,512
	12/31/2020	0	770,000