Answer:
The interest expenses to be reported for July 1, 2017 and December 31, 2017 is $116,230
Step-by-step explanation:
We begin by calculating cash interest on the bond
Cash interest on the bond = $1,970,000 × 12% × 6/12
= $118,200
We will also find the premium on bonds payable
Premium on bonds payable = (102 -100)
= 2%
Therefore, premium on bonds payable = $1,970,000 × 2%
= $39,400
Finding semi annual premium amortized for both July 1, 2017 and December 31 is ;
= $39,400 / 10×2
= $39,400 / 20
= $1,970
We will now calculate the interest expenses for July 1, 2017 and December 31
Interest expenses = Cash interest - Premium amortized
= $118,200 - $1,970
= $116,230