Question

Franklin corporation issues $97,000, 8%, 5-year bonds on January 1, for $101,370. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is:________.

a. $4,317
b. $7,760
c. $3,443
d. $3,880

Answer 1

c. $3,443

Step-by-step explanation:

Date Account Titles Debit Credit

Jan 1 Cash 101370

Bond payable 97000

Premium on issue of bonds 4,370

(101370-97000)

Jul 1 Interest expenses (3680 - 437) 3,443

Premium on issue on bond 437

(4379/5 * 6/12)

Cash (97,000*8%*6/12) 3,800