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Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Evans Co. produces and sells motorcycle parts. On the first day of its fiscal
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Evans Co. produces and sells motorcycle parts. On the first day of its fiscal year, Evans Co. issued $20,000,000 of three-year, 13% bonds at a market (effective) interest rate of 11%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 4 and Exhibit 5. Round to the nearest dollar. b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. d. The amount of the bond interest expense for the first year. Round to the nearest dollar. Remember, the selling price of a bond is the sum of the present values of: the face amount of the bonds due at the maturity date and the periodic interest to be pa d on the bonds The market rate of interest is used to compute the present value of both the face amount and the periodic interest As the discount or premium is amortized, the carrying amount of the bond changes. As a result interest expense also changes each period
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