A company issues $17200000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on June 30 and December 31. Th

Question

3 years ago

9

e proceeds from the bonds are $16904864. What is interest expense for 2021, using straight-line amortization

1 answer:

tekilochka [14] · Answer 1 · 2022-11-29T18:53:55+03:00

Answer:

$1,691,122

Explanation:

First, calculate the discount on the bond

Discount on the bond = Face value of bond - Proceeds from the bond = $17,200,000 - $16,904,864 = $295,136

Now prepare the bond amortization table

The Bond amortization table is attached with this answer please find that

Now calculate the Interest expense for 2021

Interest Expense = Interest Expense on June 30, 2021 + Interest Expense on December 31, 2021

Interest Expense = $845,493.63 + $845,628.31

Interest Expense = $1,691,121.94

Interest Expense = $1,691,122