# Calculate the total amount of interest expense over the life of the bonds

Question 1Calculate the total amount of interest expense over the life of the bonds for the following independentsituations.a) AED100,000 face value, 10%, 10-year bonds issued at 101.b) AED240,000 face value, 5%, 5-year bonds issued at 100.c) AED300,000 face value, 9%, 6-year bonds issued at 98.Question 2ABC Corporation issued AED2,000,000 of 10%, 6-year bonds dated July 1, 2011, with semiannualinterest payments . The bonds were issued on January 1, 2011, at 97. ABC’s year-end isDecember 31.a) Were the bonds issued at a premium, a discount, or at par?b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?c) If the company uses the straight-line method of amortization, what is the amount of interestexpense ABC Corporation will show for the year ended December 31, 2011?Question3On the first day of the current fiscal year, AED2,000,000 of 10-year, 10% bonds, with interest payableannually, were sold for AED2,250,000. Present entries to record the following transactions for thecurrent fiscal year:(a)(b)(c)Issuance of the bonds.First annual interest payment.Amortization of bond premium for the year, using the straight-line method ofamortization.Question4Future Sources, Inc. reported the following results for the year ending July 31, 2012:Retained earnings, August 1, 2011Net incomeCash dividends declaredStock divide\$875,000260,000120,000100,000nds declaredPrepare a retained earnings statement for the fiscal year ended July 31, 2012.

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