On January 1, a company issued 4%, 10-year bonds with a face amount of $60 million...
On January 1, a company issued 4%, 10-year bonds with a face amount of $60 million for $51,073,764 to yield 6%. Interest is paid semiannually. What was the straight-line interest expense on the December 31 annual income statement?
Homework Answers
Correct answer-----------$ 3,292,623.60 or 3,292,624
Working
| Bond issue price | $ 51,073,764.00 |
| Face value | $ 60,000,000.00 |
| Discount on bonds payable | $ 8,926,236.00 |
| Number of Interest payments (10 years x 2) | 20 |
| Discount/ premium to be amortized per Half year | $ 446,311.80 |
| Cash Interest on bond semiannual (60000000 x 2%) | $ 1,200,000.00 |
| Interest expense to be recorded semiannually (1200000+446311.80) | $ 1,646,311.80 |
| Interest expense to be recorded Annually (1646311.80 x 2) | $ 3,292,623.60 |
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On January 1, a company issued 4%, 10-year bonds with a face
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