70 Quatro Co. issues bonds dated January 1, 2017, with a par value of S710000 Th

Question

70 Quatro Co. issues bonds dated January 1, 2017, with a par value of S710000 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 8%, and the bonds are sold for $728,598. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an amortization table for these bonds using the effective interest method to amortize the premium. 4.32 points Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 What is the amount of the premium on these bonds at issuance? Required 2>

Explanation / Answer

Solution 1:

Amount of premium on bonds = Par value - Issue price

= $728,598 - $710,000 = $18,598

Solution 2:

Solution 3:

Total bond interest expense over the life of bond Particulars Amount Amount Repaid: 6 semiannual interest payments of $31,950 each $191,700.00 Par Value at Maturity $710,000.00 Total Repaid $901,700.00 Less: Amount borrowed $728,598.00 Total bond interest expense $173,102.00

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