Mertsis Corporation issued $400,000 five-year bonds on April 1, 2011. Interest is paid semi- annually on April 1 and October 1 and the company€™s year end is March 31. Below is a partial amortization schedule for the first few years of the bond issue. 

Instructions

(a) Were the bonds issue data discount or at a premium?

(b) What is the bonds€™ face value?

(c) What will the bonds€™ amortized cost beat the maturity date?

(d) What is the bonds€™ contractual interest rate? The market interest rate?

(e) Identify what amounts, if any, would be reported as a current liability and non-current liability with respect to the bonds and bond interest accounts on March 31, 2013.

(f) What will be the total interest payment over the five-year life of the bonds? Total interest expense?

(g) Would your answers in part (f) change if the bonds had been issued at a discount instead of a premium or at a premium instead of a discount? Explain.

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Semi-Annual Interest Period April 1, 2011 October 1, 2011 April 1, 2012 October 1, 2012 April 1, 2013 October 1, 2013 April 1, 2014 Bond Amortized Cost $418,444 Interest Payment Interest Expense Amortization $1,723 $6,277 6,251 6,225 $8,000 8,000 416,721 414,972 1,749 1,775 1,802 1,829 8,000 413,197 6,198 6,171 411,395 409,566 8,000 8,000 1,857 8,000 6,143 407,709