Part 1. The issuer's cash proceeds from the issuance of these bonds are $308438
Part 2. Total bond interest expense $141562
Part 3. The bond interest expense recorded on the first interest payment date is $7078
Part 1.
Premium on bonds payable = Cash proceeds from the issuance of bonds - Par value of bonds
Semi-annual bond premium amortization = Premium on bonds payable / Semi-annual interest payment period
Par value of Bonds = $ 250000
Selling Price = $ 123.375
Cash proceeds from issue of bonds = $ 250000 * 123.375%
= $ 308437.5 or $308438
Part 2.
Calculation of total bond interest expense over the life of bonds :
Amount repaid ( 20 * 250000 * 8% *6/12 ) 200000
Par value at maturity 250000
Total repayments 450000
Less: Cash proceeds -308438
Total bond interest expense $141562
Part 3 :
Premium on bonds payable = $ 308438 - $ 250000 = $ 58438
Semi-annual bond premium amortization = $ 58438 / 20 = $ 2922
Semi-annual interest expense = Semi-annual interest payment - Semi-annual bond premium amortization
= $ 10000 - $ 2922
= $ 7078
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