Answer:
a) premium on bonds payable 9,850
b) Total Interest: 146,171.78
c) bonds payable 400,000
premium on BP 9,850
net 409,850
Explanation:
procceds 409,850
face value 400,000
premium on bonds payable 9,850
b) to know the total interest expense we need to consrtuct the schedule of amortization for the bonds:
interest expense: carrying value x market semiannual rate
first year: 409,850 x 12%/2 = 24.591
cash disbursements: bond face value x bond semiannual rate (constant)
400,000 x 13%/2 = 26,000
amortization: difference between disbursements and interest expense.
carrying value: beginning less amortization.
c)
At issuence the bond will be disclosure as follow:
bonds payable 400,000
premium on BP 9,850
net 409,850
