Practivce acct chapber 10-P x ) SHREYA CHAND? @ Shoes for women L m Relable OO-T

Question

Practivce acct chapber 10-P x ) SHREYA CHAND? @ Shoes for women L m Relable OO-To-o ? create Your Free w. @ my math lab Connect accoun whispering Hals Ap Help 30pts) QS 10-14B Effective Interest: Bond discount computations LO P5 Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 4%, which implies a seling price of 75 %. The effective interest method is used to alocate nterest expense. 1. Using the impled selling price of 75 %, what are the issuer's cash proceeds from issuance of these bonds. What total amount of bond interest expense will be recognized over the lide of these bonds? Amount repaid Par value at matunty Less amount borrowed (from part 1) Tosal bond inerest expense G Search or type URL

Explanation / Answer

SOLUTION

1. Bond’s cash proceeds = $240,000 * 75.25% = $180,600

2. Total bond interest expense over life of bonds-

*$240,000 * 10% * 1/2 = $12,000

3. Bond interest expense on first payment date:

= $180,600 * 7% = $12,642

Amount ($) Amount ($) Amount repaid: 30 payments of 12,000* 360,000 Par value at maturity 240,000 Total repayments 600,000 Less amount borrowed (180,600) Total bond interest expense 419,400

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.