Question

On October 1 2017 Sunland Company issued 4 10 year bonds with a face value of $6110000 at 104 Interest is paid on October 1 and April 1 with any premiums or discounts amortized on a straight line basis Bond interest expense reported on the December 31 2017 income statement of Sunland Company would be:

Answer 1

The income statment will list

• Interest expense 219,960

Step-by-step explanation:

face value 6,110,000

issued at 104

`Principal *(issued\: points)/(100)  = cash \:proceeds\\6,110,000 *\: (104)/(100) = 6,354,400`

Premium 244,400

Straight line method

`(Premium)/(total \: payments) = amortization\: per \: payment`

It's life is 10 years. It makes 2 payment per year. Total payment 20

244,400/20 = 12,220

Cash disbursements per payment

6,110,000 x 2% = 122,200

premium amortization 12,220

Interest expense per payment 109,980

Total interest expense per year 219,960 (there are two payment per year)