Quatro Co. issues bonds dated January 1, 2016, with a par value of $400,000. The bonds' annual

Question:

Quatro Co. issues bonds dated January 1, 2016, with a of $400,000. The bonds' annual contract rate is 13%, 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 12%, and the bonds are sold for $409,850.
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 like the one in Exhibit 10B.2 for these bonds; use the effective interest method to amortize the premium?
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...