Tano issues bonds with a par value of $97,000 on January 1, 2015. The bonds’ annual contract rate is 10%

Tano issues bonds with a par value of $97,000 on January 1, 2015. The bonds’ annual contract rate is 10%, 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 $92,234.

1.	What is the amount of the discount on these bonds at issuance?

Discount  $ 4,766

2.	How much total bond interest expense will be recognized over the life of these bonds?

3.	Prepare an amortization table using the straight-line method to amortize the discount for these bonds. (Round your intermediate calculations to the nearest dollar amount.)

Explanation:

1.

Discount = Par value – Issue price = $97,000 – $92,234 = $4,766

2.

Total bond interest expense over the life of the bonds
Amount repaid
Six payments of $4,850*	$	29,100
Par value at maturity		97,000
Total repaid		126,100
Less amount borrowed		(92,234	)
Total bond interest expense	$	33,866

*97,000 × 0.10 × ½ = $4,850

3.

Straight-line amortization table ($4,766/6 = $794)