Question

A company issued 10-year,7%bonds with a par value of $100,000. The company received $96,526 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is: (round to the nearest dollar)

Answer 1

$3,673.70

Step-by-step explanation:

Discount on issue = $100,000 - $96,526 = $3474

Divide by Total semiannual periods = 10*2 = 20

Semiannual Discount amortization = $3474 /20 = $173.70

Semiannual Cash interest = $100,000*7%/2 = $3,500

Add: Discount amortization = $173.70

Interest expense for the first semiannual interest period = $3,673.70