Question

Quatro Co. issues bonds dated January 1, 2019, with a par value of $900,000. 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 8%, and the bonds are sold for $947,165. 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 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 01/01/2019 Cash Interest Paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value 06/30/2019 12/31/2019 06/30/2020 12/31/2020 06/30/2021 12/31/2021 Total

Answer 1

Face value of the Bond Bond Selling price Premium on bonds Payable 900000 947165 47165 Total Bond interest Expenses over the lifeof the bond Amount Repaid : 6 Payment of $45,000 270000 Par value at Marturiy 900000 Total repaid 1170000 Less amount borrowed 947165 Total interest Expenses 222835

Period Interet Cash Paid Year Jan 1/19 June 30/19 Dec 31/19 June 30/20 Dec 31/20 June 30/21 Dec 31/21 45000 45000 45000 45000 45000 45000 37887 37602 37306 36998 36678 36345 Premium Unamortized Carrying Amortised Premium | Value 47165 947165 7113 40052 940052 7398 32654 932654 7694 24960 924960 8002 16958 916958 8322 8637 908637 8655 -18 899982 Cash Paid = 900000*10%*6/12 Interest Expenses 947165*8%*6/12 45000 37887