Question

On January 1 of the current year, Barton Corporation issued 12% bonds with a face value of $83,000. The bonds are sold for $78,850. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, five years from now. Barton records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 is

Answer 1

$10,790

Step-by-step explanation:

Face value of the bond = $83,000

Market value = $78,850

Bond discount value = Face value of the bond - Market value

$83,000 - $78,850

= $4,150

Amortized over 5 years under straight line method

Per year = $4,150 ÷ 5

= $830

Interest on bond for the year = Face value of the bond × Issued Bonds in percentage

= $83,000 × 12% = $9,960

Bond interest expense = Interest on bond for the year + Per year amortization

= $9,960 + $830

= $10,790