?SHREYA CHAND I @Shoes for women l Relable-Go To. O· ?Create Your Free w. @mynat

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?SHREYA CHAND I @Shoes for women l Relable-Go To. O· ?Create Your Free w. @mynath lab Connect acco hispe ing Hils Ao He Opts) QS 10-15B Effective Interest: Bond premium computations LO P6 Garcia Company issues 10%, 15-year bonds with a per value of $240,000 and semiannual interest payments on the issue date. the annual market rate for these bonds is 8%, which implies a selling price of 117 ¼. 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 wil be recognized over the life of these bonds? value at maturty_ Totail repayments Less amount borowed (from part 1) Total bond interest expense G Search or type URL

Explanation / Answer

1) Bond's Cash proceeds :-

= $240000 * (117.25 / 100)

= $281400

2) Amount Repaid :-

3) Interest Expense :-

= $281400 * 4%

= $11256

Particulars Amount($) Interest Payments($12000*30) 360000 Add : Discount Amount 59400 Total Interest 419400

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