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On January 1, 2019, Tower company issues $15,000 in bonds for $14,700. They were 6 year...

On January 1, 2019, Tower company issues $15,000 in bonds for $14,700. They were 6 year bonds with a coupon rate of 9% and pay semiannual interest. The straight-line method is used to amortize the bond discount. On June 30, 2019 when the first payment is made, how much interest Expense will be recorded?

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Answer #1

Interest expense = $700

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Bond issue price   $ 14,700
Face value $ 15,000
Discount on bonds payable $ 300
Number of Interest payments (6 years x 2)                          12
Discount/ premium to be amortized per Half year $ 25
Cash Interest on bond (15000 x 4.5%) $ 675
Interest expense to be recorded (675+25) $ 700
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