Answer:
$116,230
Explanation:
Calculation to determine the amount of interest expense to be reported on July 1, 2017, and December 31, 2017.
First step is to find the Cash interest on the Bond calculated as:
Cash interest on the Bond = 1,970,000*12%*6/12 = $118,200
Second step is to find the Premium on Bonds Payable calculated as :
Note that (102%-100%)=2%
Hence,
Premium on Bonds Payable = 1,970,000*0.02 = 39,400
The third step is to find the Semiannual bond Premium Amorixed for both July 1, 2017, and December 31 calculated as :
Semiannual bond Premium Amorixed = 39,400/(10*2)
Semiannual bond Premium Amorixed = 39,400/20
Semiannual bond Premium Amorixed = 1,970
The last step is to calculate Interest expenses for the both July 1, 2017, and July 1, 2017, and December 31 using this formula
Interest Expenses = Cash interest - Premium amortized
Let plug in the formula
Interest expenses = 118,200-1,970 = $116,230
Therefore the amount of interest expense to be reported on July 1, 2017, and December 31, 2017 will be $116,230