Question

Exercise 14-4 Straight-Line: Amortization of bond discount Tano Company issues bonds with a par value of $180,000 on January 1, 2019. The bonds' annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in the years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862. 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 a straight-line amortization table like Exhibit 14.7 for these bonds. P2

Answer 1

AutoSave Of Book3. Search File Home Insert Data Review View Help F19 Page Layout Formulas v 4 8723 IF G H I Discount on bonds issuance Par value of bonds-issue price of bonds 180000-170862 9318 3) Straight line amortization Total discount(A) Total periods(B) discount recognization in each period(A/B) 9318 6 9138/6 1523 Semi annual period end Unamortized discount Carrying value 30/06/2019 1523 172385 31/12/2019 1523 173908 30/06/2020 1523 175431 31/12/2020 1523 176954 30/06/2021 1523 178477 31/12/2021 1523 180000 While calculating Bonds interest we will add discount amoritization under straight line method of amortization interest interest(A) discount(B) total interest(A+B) 30/06/2019 180000 8/100"6/12=7200 1523 8723 31/12/2019 180000*8/100"6/12=7200 1523 8723 30/06/2020 180000 8/100*6/12=7200 1523 8723 31/12/2020 180000*8/1006/12=7200 1523 8723 30/06/2021 180000 8/100*6/12-7200 1523 8723 31/12/2021 180000*8/100*6/12=7200 1523 8723