Stanford issues bonds dated January 1, 2019, with a par value of $248,000. The bonds’ annual contract rate is 7%, 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 10%, and the bonds are sold for $229,115 1. What is the amount of the discount on these bonds at issuance?
2. How much total bond interest expense will be recognized over the life of these bonds?
3. Prepare an effective interest amortization table for these bonds.

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

$18,885

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

total interest expense = ($248,000 x 7% x 3 years) + $18,885 = $70,965

3. Prepare an effective interest amortization table for these bonds.

see attached PDF

Explanation:

the journal entry to record the issuance

January 1, 2019, bonds issued at a discount

Dr Cash 229,115

Dr Discount on bonds payable 18,885

    Cr Bonds payable 248,000

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