Ellis issues 8.0%, five-year bonds dated January 1, 2016, with a $430,000 par va

Question

Ellis issues 8.0%, five-year bonds dated January 1, 2016, with a $430,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $466,680. The annual market rate is 6% on the issue date Required 1. Complete the below table to calculate the total bond interest expense over the bonds' life. Total bond interest expense over life of bonds Amount repaid payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense 0 2. Prepare a straight-line amortization table for the bonds life Semiannual Period- Una End 01/01/2016 06/30/2016 12/31/2016 06/30/2017 12/31/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 06/30/2020 12/31/2020 Premium Carrying Value

Explanation / Answer

1 Amount repaid: 10 payments of $17200 172000 Par value at maturity 430000 Total repaid 602000 Less amount borrowed 466680 Total bond interest expense 135320 2 Semiannual period end Unamortized premium Carrying value 1/1/2016 36680 466680 6/30/2016 33012 463012 12/31/2016 29344 459344 6/30/2017 25676 455676 12/31/2017 22008 452008 6/30/2018 18340 448340 12/31/2018 14672 444672 6/30/2019 11004 441004 12/31/2019 7336 437336 6/30/2020 3668 433668 12/31/2020 0 430000

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