Question

On January 1, Elias Corporation issued 10% bonds with a face value of $62,000. The bonds are sold for $60,140. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is a. $6,200 b. $ 6,386 c. $517 d. $1,860
please help

Answer 1

Correct answer-----------(b) $6386

Working

	Changes During the Period			Ending Bond Liability Balance
Period Ended	Cash Paid	Discount Amortized	Interest expense	Bonds payable	Discount on Bonds payable	Carrying Value
Start				$                  62,000	$                   1,860	$             60,140
June 30	$                 3,100	$                       93	$                3,193	$                  62,000	$                   1,767	$             60,233
Dec 31	$                 3,100	$                       93	$                3,193	$                  62,000	$                   1,674	$             60,326

Interest for 2 terms that is for June and Dec will be total interest expense (3193+3193=$6386).

Bond issue price	$ 60,140
Face value	$ 62,000
Discount on bonds payable	$ 1,860
Number of Interest payments (10 years x 2)	20
Discount/ premium to be amortized per Half year	$ 93
Cash Interest on bond (62000 x 5%)	$ 3,100
Interest expense to be recorded (3100+93)	$ 3,193