Sears issues bonds with a par value of $109,200 on January 1,2009. The bond\' an

Question

Sears issues bonds with a par value of $109,200 on January 1,2009. The bond' annual contract rate is 6%, 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 8%, and the bonds are sold for $103,740. What is the amount of the discount on these bonds at issuance? (Omit the "$" sign in your response.) How much total bond interest expense will be recognized over the life of these bonds? (Omit the "$" sign in your response.) Use the straight-line method to amortize the discount for these bonds like the one in Exhibit 10.7. (Make sure that the unamortized discount is adjusted to "0" in the last period. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Explanation / Answer

help: The bonds sold for 165,523, which is a discount from par of 9,477. 2) The bonds will pay interest semi annually of 3,500 (Par or face amount of Bond x 2%) for three years, or 6 periods, totaling 21,000. Total bond interest expense will be 30,477.

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