Answer:
Premium on the issue is $6,931
Bond interest expense is $10,343.79
Bond carrying value is $114,474.79
Explanation:
The premium on the day of issue is the bonds' cash proceeds less the face value.
Cash proceeds is $114,931
Face value is $108,000
Premium =$114,931-$108,000=$6,931
Interest expense at December year one is the cash proceeds from the bondholders multiplied by the bond yield to maturity of 9% as shown below
interest expense=$114,931*9%=$10,343.79
The bond carrying value at the end of the year is the cash proceeds plus the interest expense less coupon payment as below:
Carrying value=$114,931+$10,343.79-($108,000*10%)=$114,474.79
