Garcia Company issues 10%, 15-year bonds with a par value of $210,000 and semian

Question

Garcia Company issues 10%, 15-year bonds with a par value of $210,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 14. The effective interest method is used to allocate interest expense. 1. Using the implied selling price of 117 14, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What amount of bond interest expense is recorded on the first interest payment date?

Explanation / Answer

what are the issuer's cash proceeds from issuance of these bonds

2100*117.25 =246255

What total amount of bond interest expense will be recognized over the life of these bonds?

Payments 30*210000*10%/2 315000 Fave Value 210000 Total Repayment 525000 Less Amount Borrowed 246225 Total Bond Interest 278775

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