Question

ework Assignment Enviro Company issues 700%, 10 year bonds with a par value of $360,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 4.00%, which implies a selling price of 126.125 The straight-line method is used to allocate Interest expense. 1. Using the implied selling price of 126.125what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What total amount of bond interest expense will be recognized over the life of these bonds? Total Bodsterest Expense Overite of Bond Total Les amount o f Tolongapore part 1) ( Required Required 3 > < Prev 26 of 27 1 Next > ere to search

Answer 1

Solution 1:

Cash proceeds = $360000*126.125% = $454,050

Solution 2:

Amount Total bond interest expense over the life of bond Particulars Amount Repaid: 20 payments of ($360000*7%*6/12=) $12600 each Par Value at Maturity $252,000.00 $360,000.00 Total Repaid Less: Amount borrowed $612,000.00 $454,050.00 Total bond interest expense $157,950.00 16 17 18 --menon. 09 = sasa : 92 :: 3 252 253 2: : : : : 22 23 24 27 29 30 31 32 33 34 36 38 39 40 41 44 45 et775 ) Sheet31 ) Sheet32 Sheet33 Sheet6 (5)

Solution 3:

First bpnd interest expense = $454050*4%*6/12 = $9,081