Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments.

On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 871⁄2. The straight-line method is used to allocate interest expense.

1 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?

AppendixLO1