Question

Quatro Co. issues bonds dated January 1, 2018, with a par value of $720,000. The bonds' annual contract rate is 10%, 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 $757,732. 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 an amortization table for these bonds; use the straight-line method to amortize the premium. Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 1 What is the amount of the premium on these bonds at issuance? Premium

Answer 1

720000 757732 37732 37732 Face value of the Bond Less: Bond Selling price Premium on bonds Payable Premium Total Bond interest Expenses over the lifeof the bond Amount Repaid : 6 Payment of $36000 Par value at Marturiy Total repaid Less amount borrowed Total bond interest Expenses 216000 720000 936000 757732 178268

Amortization Table is really highly sensitive to the round off to the intermediate calculation . Please USe the Comment Box for Any further Clarity

Semiannual Period Unmortized Discount 01-01-2018 06/30/2018 12/31/2018 06/30/2019 12/31/2019 06/30/2020 12/31/2020 Carrying Value 37732 757732 31443 751443 25155 745155 18866 738866 12577 732577 6289 726289 720000

Semiannual Period Unmortized Discount 01-01-2018 06/30/2018 12/31/2018 06/30/2019 12/31/2019 06/30/2020 12/31/2020 Carrying Value 37732 757732 31443 751443 25154 745154 18865 738865 12576 732576 6287 726287 ol 720000