ign ure httpsnewconnectmheducationcomflowconnecthtml Garcia

ign ure https://newconnect.mheducation.com/flow/connect.html Garcia Company issues 15-year bonds with ? par value of $33 000 and semiannul interest payments. On the issue date, the annual market rate for these bonds is 8%, which implis ? selling price of TT7 . The effective interest method is used to allocate 1. Using the implied selling price of 117 Y4, what are the issuer\'s cash proceeds from issuance of these bonds 2 What total amount of bond interest expense will be recognized over the life of these bonds? 2.000 S 300,000 Par value at maturey 890.000 Less amount borowed (from part 1) Total bond interost expense 403.075 3. What amount of bond interest expense is recorded on the first interest payment date?

Solution

Req 1: Par value of bonds 330000 Number of Bonds 3300 Issue price 117.25 Cash proceeds from Bonds 386925 Req 2: Amount repaid 30 payment of $ 16500 495000 Par value of maturity 330000 Total repayment 825000 Less: Amount borrowed 386925 Total Interest paid 438075 Req 3: Amort chart Date Cash Interest Premium Unamortized Carrying Interest Expense Amortized Premium Value of bonds 01.01Yr-1 86925 386925 30.06.Yr-1 16500 15477 1023 85902 385902 31.12.Yr-1 16500 15436 1064 84838 384838 Total Interest expense for the Year-1: 30913 (15477+15436)