Question

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Tano Company issues bonds with a par value of $82,000 on January 1, 2019. The bonds' annual contract rate is 7%, 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 $79,849. 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 for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 | Required 3 Prepare a straight-line amortization table for these bonds. (Round your intermediate calculations to the nearest dollar amount.) Semiannual Period- Unamortized End Discount Carrying Value 01/01/2019 06/30/2019 12/31/2019 06/30/2020 12/31/2020 06/30/2021 12/31/2021 < Required 2 Required 3 )

Answer 1

Solution: 82000 1) Par value Issue price Discount on bond issue 79849 2151 2) Total bond interest expense over life of bonds: Amount repaid: 6 payments of=82000*7%*6/12 Par value at maturity Total repaid Less amount borrowed Total bond interest expense 2,870 17,220 82,000 99,220 82,000 17,220 3) Discount amortization per period=2151/6|| 359 Semiannual Period-End Unamortized Discount Calculation 01/01/2019 06/30/2019 12/31/2019 06/30/2020 12/31/2020 06/30/2021 12/31/ 2021 2,151 1,7932151-359 1,434 1793-359 1,076 1434-359 7171076-359 359 717-359 359-359 Carrying Value b=82000-a 79,849 80,208 80,566 80,925 81,283 81,642 82,000 0