Question
Welch issues bonds dated January 1, 2011, with a par value of $250,000. The bonds annual contract rate is 9%, and interest is paid semiannually
Welch issues bonds dated January 1, 2011, with a par value of $250,000. The bonds annual contract rate is 9%, 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 $231,570.
1. | What is the amount of the discount on these bonds at issuance? (Omit the "$" sign in your response.) |
Discount | $ |
2. | How much total bond interest expense will be recognized over the life of these bonds? (Omit the "$" sign in your response.) |
Total bond interest expense | $ |
3. | Use the effective interest method to amortize the discount for these bonds. (Make sure that the unamortized discount equals "0" and the Carrying value equals the face value of the bonds in the last period. Bond interest expense in the last period should be calculated as Cash interest paid (+) Discount amortized. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) |
Semiannual Interest Period-End | (A) Cash Interest Paid | (B) Bond Interest Expense | (C) Discount Amortization | (D) Unamortized Discount | (E) Carrying Value | |||||||
1/01/2011 | $ | $ | ||||||||||
6/30/2011 | $ | $ | $ | |||||||||
12/31/2011 | ||||||||||||
6/30/2012 | ||||||||||||
12/31/2012 | ||||||||||||
6/30/2013 | ||||||||||||
12/31/2013 | ||||||||||||
Total | $ | $ | $ | |||||||||
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started