Answer:
Bonds Payable $1,061,000
Discount $38,196
Explanation:
The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.
Discount on the bond = Face value - cash proceeds = $1,061,000 (100%- 96%) = $42,440
According to straight line amortization
Discount charged in the period = $42,440 / 10 = $4,244 per year = $2,122 per six months
Unamortized discount = $42,440 - $4,244 = $38,196
Coupon payment of interest = $1,061,000 x 11% = $116,710 per year = $58,355 per six months
Total Interest Expense = $58,355 + $2,122 = $60,477
The Bond will be reported at its face value.
