Evans Co produces and sells motorcycle parts. On the first day of its fiscal year, Evans Co. issued $50,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following, presenting figures used in your computations.
a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibits 4 and 5. Round to the nearest dollar.
b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar.
c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar.
d. The amount of the bond interest expense for the first year.

a. Present value of $1 for 10 (semiannual)

periods at 6% (semiannual rate)..................................... 0.5584

Face amount......................................................................... × $50,000,000 $ 27,920,000

Present value of annuity of $1 for 10

periods at 6%.................................................................. 7.36009

Semiannual interest payment................................................ × $3,500,000 25,760,315

Proceeds of bond sale.......................................................... $53,680,315

b. First semiannual interest payment........................................ $ 3,500,000

6% of carrying amount of $53,680,315............................... 3,220,819

Premium amortized.............................................................. $ 279,181

c. Second semiannual interest payment................................... $ 3,500,000

6% of carrying amount of $53,401,134*............................. 3,204,068

Premium amortized.............................................................. $ 295,932

*$53,680,315 - $279,181

d. Annual interest paid............................................................. $ 7,000,000

Less premium amortized...................................................... 575,113*

Interest expense for first year............................................... $ 6,424,887

*$279,181 + $295,932