Clovis Company recently issued $500,000 (face value) bonds to finance a new construction project. The company's chief accountant prepared the following bond amortization schedule:

Required:
1. Compute the discount or premium on the sale of the bonds, the semiannual coupon interest rate, and the semiannual effective interest rate.
2. The company's vice president of finance wants any discount (or premium) at issuance of the bonds to be recorded immediately as a loss (or gain) at the issue date. Do you agree with this approach? Why or why not?
3. On December 31, 2019, the bonds' net carrying value is $522,258. In present value terms, what does this amount represent?
4. Suppose that market interest rates were 6% semiannually on January 1, 2020, or 12.36%annually. [This 12.36% annual rate of interest is equal to the 6% semiannual rate, compounded: 0.1236 = (1.06— 1.06) - 1.00.] What is the bond's market price on that date? Is the company better or worse off because of the interest rate change? Explain.

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Interest Expense Semiannual Payment Premium Amortization Net Liability Date 7/1/2017 12/31/2017 6/30/2018 12/31/2018 6/30/2019 12/31/2019 6/30/2020 12/31/2020 630/2021 12/31/2021 $540,554 537,176 533,663 530,010 526,210 $25,000 (3,378) (3,513) (3,653) (3,800) (3,952) (4,110) (4,274) (4,445) (4,623) (4,806) 21,487 21,200 21,048 20,890 20,726 25,000 25,000 25,000 518,148 513,874 509,429 504,806 500,000 5 25,000 20,377 25,000