Quatro Co issues bonds dated January 1 2017 with a par value

Quatro Co. issues bonds dated January 1, 2017, with a par value of $840,000. The bonds\' annual contract rate is 13%, 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 12%, and the bonds are sold for $860,685. . 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 using the effective interest method to amortize the premium. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Prepare an amortization table for these bonds using the effective interest method to amortize the premium. (Round all amounts to the nearest whole dollar.) Semiannual Cash Interest Bond Interest Premium Unamortized carrying Value Interest Period-End 01/01/2017 06/30/2017 12131/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 Total Paid Expense Amortization Premium Carrying v s 20,685 860,685

Solution

Answer

Semiannual Interest Period End

Cash Interest paid[D=840000 x 13% x 6/12]

Bond Interest Expense [E = A x 12% x 6/12]

Premium Amortisation [C=D-E]

(F) Unamortised Premium [F=F-C]

(A)Carrying Value [A-C]

01-01-2017

20685

860685

6/30/17

54600

51641

2959

17726

857726

12/31/17

54600

51464

3136

14590

854590

6/30/18

54600

51275

3325

11265

851265

12/31/18

54600

51076

3524

7741

847741

6/30/19

54600

50864

3736

4005

844005

12/31/19

54600

50640

3960

46

840046

Total

327600

306961

20639

Semiannual Interest Period End	Cash Interest paid[D=840000 x 13% x 6/12]	Bond Interest Expense [E = A x 12% x 6/12]	Premium Amortisation [C=D-E]	(F) Unamortised Premium [F=F-C]	(A)Carrying Value [A-C]
01-01-2017				20685	860685
6/30/17	54600	51641	2959	17726	857726
12/31/17	54600	51464	3136	14590	854590
6/30/18	54600	51275	3325	11265	851265
12/31/18	54600	51076	3524	7741	847741
6/30/19	54600	50864	3736	4005	844005
12/31/19	54600	50640	3960	46	840046
Total	327600	306961	20639