Question

Accounting for Long Term Liabilities QS 10-6 Straight-Line: Bond computations LO P2 Enviro Company issues 8% 10-year bonds with a par value of $150,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10% which implies a selling price of 87 2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 . what are the issuer's cash proceeds from issuance of these bonds? Cash proceeds $131.250 2. What total amount of bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid: payments of Par value at maturity Total payments Less amount borrowed from part 1) Total bond interest expense 3. What is the amount of bond interest expense recorded on the first interest payment date? Bondinerest expense < Prev 3 of 14 Next > 70 % & .

Answer 1

Solution ♡ 150000. X 0.875 = 131250 of 6000 120000 18750 Twenty semiannual Interest payment plus bond discount et r 150000 - 131250] Total bond Interest expense 138750 * 150000 X 0.08 x 1/2 = 6000 Bond Interest expense on first payment date - 138750/20 Semi annual perlods 5 6937.5