Question

Sunland Company received proceeds of $664000 on 10-year, 6% bonds issued on January 1, 2019. The bonds had a face value of $704000, pay interest annually on December 31, and have a call price of 105. Sunland uses the straight-line method of amortization. What is the amount of interest expense Sunland will show with relation to these bonds for the year ended December 31, 2020

Answer 1

$46,240

Step-by-step explanation:

Calculation to determine the amount of interest expense Sunland will show with relation to these bonds for the year ended December 31, 2020

Interest expense=($704,000 × .06)+[($704000-$664000)/10]

Interest expense= $42,240+($40,000/10)

Interest expense=$42,240+$4,000

Interest expense=$46,240

Therefore the amount of interest expense Sunland will show with relation to these bonds for the year ended December 31, 2020 is $46,240