Question

On January 1, 2018, Solo Inc. issued 1,000 of its 8%, $1,000 bonds at 98. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2028. Solo paid $50,000 in bond issue costs. Solo uses straight-line amortization. The amount of interest expense for 2018 is:

Answer 1

Answer:

$ 82,000

Explanation:

On January 1, 2018, Solo Inc. issued 1,000 of its 8%, $1,000 bonds at 98 (i.e., for 98% of face amount). Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2028. Solo paid $50,000 in bond issue costs. Solo uses straight-line amortization. The amount of interest expense for the year is?

ANSWER :$ 82,000

Interest consists of cash paid out, $80,000, plus $20,000/10 years