Understanding Bonds??

Question

just don't get bonds let alone those issued at par, discount and premium.

I have this assignment and even though I read the chapter over and over nothing seems to sink in. I hope someone can help me understand it as well as solve it:

Enero Corporation sold a $5,420,000, 7% bond issue on January 1, 2006. The bonds pay interest each December 31 and mature 10 years from January 1, 2006. Use straight-line amortization. Assume 3 independt selling scenarios: Case A, bonds sold at par; Case B, bonds sold at 98; Case C, bonds sold at 102. Complete the schedule as of December 31, 2006:

a) Cash received at issue

b) Bond interest expense, pretax for 2006

c) Bonds payable, 7%

d) Unamortized discount

e)Unamortized premium

f)Net liability

g) stated interest rate

Oy oy oy...

Answer 1

Case A, bonds sold at par

a) Cash received at issue $5,420,000

b) Bond interest expense, pretax for 2006 $379,400

c) Bonds payable, 7% $5,420,000, interest paid $379,400

d) Unamortized discount - NA

e) Unamortized premium - NA

f) Net liability $5,420,000

g) stated interest rate 7%

Case B, bonds sold at 98

a) Cash received at issue $5,311,600

b) Bond interest expense, pretax for 2006 $390,240

c) Bonds payable, 7% $5,420,000, interest paid $379,400

d) Unamortized discount - $97,560

e) Unamortized premium - NA

f) Net liability $5,322,440

g) stated interest rate 7%

Case C, bonds sold at 102

a) Cash received at issue $5,528,400

b) Bond interest expense, pretax for 2006 $368,560

c) Bonds payable, 7% $5,420,000, interest paid $379,400

d) Unamortized discount - NA

e) Unamortized premium $97,560

f) Net liability $5,517,560

g) stated interest rate 7%