(Learning Objectives 2: Measuring cash amounts for a bond payable (premium);

amortizing the bonds using the straight-line method) Commonwealth Bank has €400,000 of 9% debenture bonds outstanding. The bonds were issued at 104 in 20X0 and mature in 20Z0

(i.e. 20 years from now).

❙ Requirements 1. How much cash did Commonwealth Bank receive when it issued these bonds?

2. How much cash in total will Commonwealth Bank pay the bondholders through the maturity date of the bonds?

3. Take the difference between your answers to Requirements 1 and 2. What does this number represent?

4. Estimate Commonwealth Bank’s annual interest expense by the effective interest amortization method.