Bonds issued at discount or premium On March 31, 2015 Louis Company issued $20,000,000 face amount of 7%, 5-year bonds payable, with interest payable each June 30 and December 31

The company received cash of $20,200,000, including the accrued interest from December 31, 2014. Louis uses the straight-line method of amortizing any discount or premium over the remaining life of the bonds - 57 months.

(a) What was the amount of accrued interest received by Louis on March 31, 2015 when the bonds were issued? (Do not assume the bonds were issued at par.)
$________________
(b) What was the amount of discount or premium on the bonds at issuance date?
(Indicate discount or premium.)
$________________
(c) What amount of cash is paid to bondholders for interest during year 2015?
$________________
(d) What is Louis' total interest expense for year 2015 related to this bond issue?
$________________
(e) What is the carrying value of this bond issue as of December 31, year 2015?
$________________

What will be an ideal response?

(a) Accrued interest: $20,000,000 × 7% × 3/12 = $350,000

(b) $150,000 discount
$20,200,000 - $350,000 accrued interest = $19,850,000
$20,000,000 - $19,850,000 for bonds = $150,000 discount

(c) $1,400,000
$700,000 (June 30) + $700,000 (December 31) = $1,400,000
$20,000,000 × .07 × 6/12 = $700,000 semiannually

(d) $1,073,684

(e) $19,873,684