Question

Quatro Co. issues bonds dated January 1, 2019, with a par value of $790,000. The bonds' annual contract rate is 9%, 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 $810,694. 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 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 What is the amount of the premium on these bonds at issuance? Premium < Required 1 Required 2 >

Answer 1

a) Premium = 810694-790000 = 20694

b) Total bond interest expense

Amount repaid
6 payment of 35550	213300
Par value of maturity	790000
Total repaid	1003300
Less: Amount borrowed	-810694
Total bond interest expense	192606

c) Amortization

Semiannual interest period	Unamortized premium	Carrying value
01/01/2019	20694	810694
06/30/2019	17245	807245
12/31/2019	13796	803796
06/30/2020	10347	800347
12/31/2020	6898	796898
06/30/2021	3449	793449
12/31/2021	0	790000