Question

On January 1 of the current year, Barton Corporation issued 11% bonds with a face value of $105,000. The bonds are sold for $99,750. 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 a.$13,125 b.$12,600 c.$5,775 d.$525

Answer 1

b.$12,600

The bond effective interest expense for the year ended December 31 is $12,600

Step-by-step explanation:

We need to get the computation of the discount value of the bond using the straight-line method first and Interest Earned

Discount Value= (Face Value - Sales Value) / Years

D.V= $105,000 - $99,750 / 5

D.V= $1,050 Per year

Interest Expenses= Face Value * Bond issued

=$105,000 * 11%

=$11,550

We need to Compute the interest expense of the bond as well

Bond Interest Expenses = Interest Expense + Discount Value

=$11,550 + $1,050

=$12,600

The bond effective interest expense for the year ended December 31 is $12,600