Question
Account for Bonds Sold at a Premium The Longo Corporation issued $10 million maturity value of...
Account for Bonds Sold at a Premium The Longo Corporation issued $10 million maturity value of six percent coupon rate bonds, with intere paid semiannually. At the time of the bond issuance, equivalent risk-related debt instruments carried a yield rate of four percent. The bonds matured in five years. Round all answers to the nearest whole number. a. Calculate the proceeds that the Longo Corporation would receive form the sale of the bonds. $ 10,898,277 b. Calculate the interest expense on the bonds for the first year. $ 10,816,243 X C. Calculate the book value of the bonds at the end of the first year. $ 10,732,567
Answers
Requirement b solution
Interest expense for the first year = $434,290
Working
Amortization table Period Cash payment Interest expense Discount on Bonds payable Carrying Value of Bond Issue -$ 898,277 $ 10,898,277 1st payment $ 300,000 $ 217,966 -$ 82,034 $ 10,816,243 2nd Payment $ 300,000 $ 216,325 -$ 83,675 $ 10,732,567 Total $ 434,290
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