Answer:
$21,322
Explanation:
The computation of the interest expense for the six months ended December 31, 2014 is shown below:
On January 1
The face value of the bond = $400,000
Carrying value of the bond = $354,118
So, unamortized discount is $45,882 ($400,000 - $354,118)
On July 1
The interest expense = $21,247 ($354,118 × 12%) ÷ 2
The interest payment = $20,000 ($400,000 × 10%) ÷ 2
So, the discount amortized is
= $21,247 - $20,00
= $1,247
The face value = $400,000
The unamortized discount is $44,635 ($45,882 - $1,247)
The carrying value of the bond $355,365 ($400,000 - $44,635)
On December 31,2014
The interest expense = $21,322 ($355,365 × 12%) ÷ 2
The interest payment = $20,000 ($400,000 × 10%) ÷ 2
