Question

Enviro Company issues 9.50%, 10-year bonds with a par value of $410,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6.50%, which implies a selling price of 127.375. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 127375. what 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 Using the implied selling price of 127.375. what are the issuer's cash proceeds from issuance of these bonds? Cash proceeds < Required 1 Required 2 >

Answer 1

Face value of the Bond Less: Bond Selling price Dicount on bonds Payable 410000 522237.5 112237.5 Cash Proceeds (410000*1.27375)= 522238 (or) 522237.5 Total Bond interest Expenses over the life of the bond Amount Repaid : 20 Payment of $19475 Par value at Marturiy Total Repaymnet Less amount borrowed Total bond interest Expenses 389500 410000 799500 522237.5 277262.5 Bond interest Expenes for First Payment (19475-(112237.5/2) 13863