Question

On January 1, the Kings Corporation issued 10% bonds with a face value of $96,000. The bonds are sold for $94,080. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Kings records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31 of the first year is.

Answer 1

Answer:

9,792 total interest expense

Explanation:

face value 96,000

issued at    94,080

discount        1,920

amortization of the bond:

discount/total payment

10 years atsemiannual payment = 20 payment

1,920/20 = 96

cash proceed:

96,000x 10%/2 = 4,800

discount                    96

interest expense  4,896 per payment

2 payment per year 9,792 total interest expense