Alberta Industries Ltd. issued 10%, 10-year bonds with a par value of $200,000 and semi-annual interest payments.

Question:

Alberta Industries Ltd. issued 10%, 10-year bonds with a of $200,000 and semi-annual interest payments. On the issue date, the annual market rate of interest for the bonds was 12%, and the selling price was $177,059. The effective interest method is used to allocate the interest.
a. What is the total amount of bond interest expense that will be recognized over the life of the bonds?
b. What is the total bond interest expense recorded on the first interest payment date?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...