Question

Exercise 10-9 Straight-Line: Amortization of bond premium LO P3 Quatro Co. Issues bonds dated January 1, 2019, with a par value of $400,000. The bonds' annual contract rate is 13%, and interestis paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuances 12% and the bonds are sold for $409.850. 1. What the amount of the premium on these bonds at ssuance? 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? Required 2 > < Prev 15 of 17 !!! Next >

Answer 1

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Statement showing Computations
Particulars	Amount
Face Value of Bonds	400,000.00
Money received on issue	409,850.00
1) Premium on issue of Bonds	9,850.00
2)
Interest Expense = 400,000*(13%/2)*(3*2)	156,000.00
3)
Period Ended	Cash Paid	Premium amortised	Interest Expense	Bonds Payable	Premium on Bonds Payable	Carrying Value
Jan 01'19				400,000.00	9,850.00	409,850.00
June 30-2019	27,641.67	1,641.67	26,000.00	400,000.00	8,208.33	408,208.33
Dec 31-2019	27,641.67	1,641.67	26,000.00	400,000.00	6,566.67	406,566.67
June 30-2020	27,641.67	1,641.67	26,000.00	400,000.00	4,925.00	404,925.00
Dec 31-2020	27,641.67	1,641.67	26,000.00	400,000.00	3,283.33	403,283.33
June 30-2021	27,641.67	1,641.67	26,000.00	400,000.00	1,641.67	401,641.67
Dec 31-2021	27,641.67	1,641.67	26,000.00	400,000.00	-	400,000.00