Answer:
$669,018
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.
Face Value = $6,000,000
Sale Proceeds = $5,558,400
Discount on the bond = Face value - cash proceeds = $6,000,000 - $5,558,400 = $441,600
This Discount will be amortized over the bond's life till maturity and added to interest expense.
Coupon Payment = Face Value x Coupon Rate = $6,000,000 x 10% = $600,000 per years = $300,000 per six months
First half of year
Interest Expense = $5,558,400 + 12% x 6/12 = $333,504
Book value = $5,558,400 + (333,504 - $300,000) = $5,591,904
Second half of year
Interest Expense = $5,591,904 + 12% x 6/12 = $335,514
Total Expense in the year = $333,504 + $335,514 = $669,018
