Problem

Welch issues bonds dated January 1, 2011, with a par value of $250,000. The bonds' annual contract rate is 9%, 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 12%, and the bonds are sold for $231,570.

1. What is the amount of the discount on these bonds at issuance? (Omit the "tiny_mce_markerquot; sign in your response.)

2. How much total bond interest expense will be recognized over the life of these bonds? (Omit the "tiny_mce_markerquot; sign in your response.)

3. Use the effective interest method to amortize the discount for these bonds. (Make sure that the unamortized discount equals "0" and the Carrying value equals the face value of the bonds in the last period. Bond interest expense in the last period should be calculated as Cash interest paid (+) Discount amortized. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.)