3 Quatro Co. issues bonds dated January 1, 2017, with a par value of $720,000. T

Question

3 Quatro Co. issues bonds dated January 1, 2017, with a par value of $720,000. The bonds' annual contract rate is 10%, 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 $757732. 4 points . 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; use the straight-line method to amortize the premium. eBook Complete this question by entering your answers in the tabs below Hint Required 1Required 2 Required 3 What is the amount of the premium on these bonds at issuance? Print emium References

Explanation / Answer

1)AMOUnt of premium =Issue price -Par value

        = 757732-720000

         = $ 37732

2)semiannual interest = 720000*.10*6/12 = 36000

Number of semiannual months =3*2 = 6    [2 semiannual months ina year]

3)Amortisation per semiannual month = 37732/6 = 6289

31443-6289=25154

**The premium amortised for 12/31/2019 is adjusted for amount available .(difference is due to rounding to whole dollars]

Amount repaid 6 payment of 36000    [36000*6] 216000 Par value at maturity 720000 Total repaid 936000 Less:Amount repaid (757732) Total bond interest expense 178268

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