Answer:
1. Cash proceed is $281,400.
2. Total bond interest expenses over the bond llife is $318,600.
3. Bond interest expense on first interest payment date is $11,256.
Explanation:
1. Using the implied selling price of 117 ¼, what are the issuer's cash proceeds from issuance of these bonds?
Selling price = 117 ¼ / 100 = 1.1725
Cash proceed = Bond face value * Bond selling price = $240,000 * 1.1725 = $281,400.
2. What total amount of bond interest expense will be recognized over the life of these bonds?
Total interest payment = $240,000 * 10% * 15 = $360,000
Total repayment = Total interest payment + Bond par value = $360,000 + $240,000 = $600,000
Total bond interest expenses over the bond llife = Total repayment - Cash proceed/Amount borrowed = $600,000 - $281,400 = $318,600
3. What amount of bond interest expense is recorded on the first interest payment date?
Bond interest expense on first interest payment date = Cash proceed * Annual market rate on issue date * (6/12) = $281,400 * 8% * 0.5 = $11,256
