Answer:
$4,800
Explanation:
Interest Expense of the bond is calculated by multiplying Face value and Coupon rate. Any discount or premium is amortized over the life of the bond and added or deducted from the interest payment in order to record the interest expense.
As per given data
Face value of Bond = $80,000
Coupon Rate = 8%
Interest Expense = Face value x Coupon rate
As on July 1 interest of only 3 months has been accrued, so we will record the interest expense of 3 months only.
On July 1
Interest Expense = $80,000 x 8% x 3/12 = $1,600
6 month period Expense will be recorded.
On December 31
Interest Expense = $80,000 x 8% x 6/12 = $3,200
Total Expense = $1,600 + $3,200 = $4,800
