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25 Mar 2018
Garcia Company issues 10%, 15-year bonds with a par value of$170,000 and semiannual interest payments. On the issue date, theannual market rate for these bonds is 8%, which implies a sellingprice of 117 1?4. The effective interest method is used to allocateinterest expense.
1. Using the implied selling price of 117 1?4,what are the issuer's cash proceeds from issuance of thesebonds.
Cashproceeds
2. What total amount of bond interest expensewill be recognized over the life of these bonds?
TotalBond Interest Expense Over Life of Bonds: Amountrepaid: paymentsof Par valueat maturity Totalrepayments Lessamount borrowed (from part 1) Total bond interest expense
3. What amount of bond interest expense isrecorded on the first interest payment date?
Bond interest expense: ????
Garcia Company issues 10%, 15-year bonds with a par value of$170,000 and semiannual interest payments. On the issue date, theannual market rate for these bonds is 8%, which implies a sellingprice of 117 1?4. The effective interest method is used to allocateinterest expense.
1. Using the implied selling price of 117 1?4,what are the issuer's cash proceeds from issuance of thesebonds.
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2. What total amount of bond interest expensewill be recognized over the life of these bonds?
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3. What amount of bond interest expense isrecorded on the first interest payment date?
Bond interest expense: ????
Elin HesselLv2
26 Mar 2018
