On January 2, 2018, Baltimore Company purchased 20,000 shares of the stock of Towson Company at $13 per share. Baltimore obtaine
1 answer:
You might be interested in
Answer:
Bond interest expense = $2,290
so correct option is b. $2,290
Explanation:
given data
Bond issued = $50,000
Interest rate = 10%
interest semi-annually = 5%
time period = 5 year
to find out
amount of bond interest expense
solution
we get first Cash interest payment that is here
Cash interest payment = $50,000 × 5%
Cash interest payment = $2,500 ....................1
and Bond premium will be
Bond premium = $52,100 – $50,000
Bond premium = $2,100 .......................2
we know interest paid semi annually so time period will be = 10
so Amortization of bond premium will be here as
Amortization of bond premium =
Amortization of bond premium = $210 .................3
so Bond interest expense will be calculate as
Bond interest expense = Cash interest payment - Amortization of bond premium .......................4
put here value
Bond interest expense = $2,500 - $210
Bond interest expense = $2,290
so correct option is b. $2,290