Question

On January 1, Elias Corporation issued 9% bonds with a face value of $63,000. The bonds are sold for $61,110. 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

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Answer Calculation of Bond Interest Expense for the year ended December 31 of the first year On June 30 Amount ($) Interest Payment (63,000 * 9% * 6/12) Amortization of Discount on Bonds Total (a) 2,835 94.50 2,929.50 On December 31 Amount ($) Interest Payment (63,000 * 9% * 6/12) Amortization of Discount on Bonds Total (b) 2,835 94.50 2,929.50 Bond Interest Expense for the year ended December 31 of the first year (a+b) 5,859 Note: 1,890 Amount of Discount on Bonds (i) (63,000 - 61,110) Number of Periods (Number of Years * 2) (ii) (10*2) Amortization of Discount on Bonds per period (i/ii) 20 94.50