Response to the following :
Using the bond details in both problem 1 and 2, confirm that the bonds' selling prices given in each problem are approximately correct.
Problem:1
Alberto Company issues 8%, 10-year bonds with a par value of $350,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87½. The straight-line method is used to allocate interest expense.
1. What are the issuer's cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What is the amount of bond interest expense recorded on the first interest payment date?
Problem:2
Sanchez Company issues 10%, 15-year bonds with a par value of $120,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117¼. The effective interest method is used to allocate interest expense.
1. What are the issuer's cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What amount of bond interest expense is recorded on the first interest payment date?