Smith & Sons, Inc., sold $200,000 face value, eight percent coupon rate, four-year bonds, for an aggregate issue pri...
Smith & Sons, Inc., sold $200,000 face value, eight percent coupon rate, four-year bonds, for an aggregate issue price of $197,000.
Calculate the total interest expense to be recorded by the company over the four-year life of the bonds.
Homework Answers
Solution:
| Total bond interest expense over the life of bond | |
| Particulars | Amount |
| Amount Repaid: | |
| 4 annual interest payments of $16,000 each | $64,000.00 |
| Par Value at Maturity | $200,000.00 |
| Total Repayments | $264,000.00 |
| Less: Amount borrowed | $197,000.00 |
| Total bond interest expense | $67,000.00 |
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