Question

Stanford issues bonds dated January 1, 2019, with a par value of $249,000. The bonds' annual contract rate is 10%, 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 $236,765. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an effective interest amortization table for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare an effective interest amortization table for these bonds. (Round all amounts to the nearest whole dollar.) Semiannual Interest Period-End Cash Interest Bond Interest Paid Expense Discount Amortization Unamortized Discount Carrying Value $ $ 236,765 01/01/2019 06/30/2019 12/31/2019 0 23 $ 12,450 $ 14,206 $ 1,756 06/30/2020 12/31/2020 06/30/2021 12/31/2021 Total

Answer 1

Face value of the Bond Bond Selling price Discount on bonds Payable 249000 236765 12235 Total Bond interest Expenses over the lifeof the bond Amount Repaid: 6 Payment of $12,450 Par value at Marturiy Total repaid Less amount borrowed Total interest Expenses 74700 249000 323700 236765 86935

Period Interet Expenses Discount Amortized Cash Paid ol Year Jan 1/19 June 30/19 Dec 31/19 June 30/20 Dec 31/20 June 30/21 Dec 31/21 12450 12450 12450 12450 12450 12450 14206 14311 14423 14541 14667 14800 1756 1861 1973 2091 2217 2350 Unamortized Discount 12235 10479 8618 6645 4554 2337 -13 Carrying Value 236765 238521 240382 242355 244446 246663 249013 Cash Paid = 249000*10%*6/12 Interest Expenses= 236765*12%*6/12 12450 14206