Question

how do you solve for the 6 payments?

Exercise 10-2 Straight-Line: Amortization of bond discount LO P2 Tano issues bonds with a par value of $95,000 on January 1, 2018. The bonds' annual contract rate is 8%, 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 $90,177. 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 amortization table using the straight-line method to amortize the discount for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 2 Required 3 How much total bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid 6 payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense 95,000 95,000 90,177 4,823

Answer 1

Discount on Bonds issued =$95,000 - $90,177 =$4,823
Cash interest paid on Bonds for each 6 month period =$95,000*8%*6/12 =$3,800
Discount amortization for each 6 month period =$4,823/6 =$804
Interest expense =$3,800+$804 =$4,604
Amortization table-Straight-Line method
Discount on Bond =$4,823
Date	Interest Payment	Interest expenses	Discount amorrtization	Unamortized Discount	Bond carrying amount
Issue date	-	-	-	4,823	90,177
1	3,800	4,604	804	4,019	90,981
2	3,800	4,604	804	3,215	91,785
3	3,800	4,604	804	2,411	92,589
4	3,800	4,604	804	1,607	93,393
5	3,800	4,604	804	803	94,197
6	3,800	4,603	803	0	95,000
Total	22,800	27,623	4,823