Question

In 2018, Hasbro Inc. issued 10% bonds with a face value of $6,000,000. These bonds mature in the five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $5,558,400 to yield 12%. Hasbro uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2018? (Round your answer to the nearest dollar.)

*Please explain. I know the answer, my method is incorrect.

Answer 1

Interest expense for 2018= $ 669,018

Amortization table
	Period	Cash payment	Interest expense	Discount on Bonds payable	Carrying Value of Bond
	Issued			$         4,41,600.00	$ 55,58,400.00
2018		$    3,00,000.00***	$        333,504*	$            33,504.00	$ 55,91,904.00
		$          3,00,000	$        335,514**	$                  35,514.24	$        56,27,418
	Totals		$ 669,018

*5558400 x 6%

**5591904 x 6%

***6000000 x 5%

Interest expense will be calculated twice in the year

First @ 6% on 5558400 and second 6% on 5591904 which comes to total 669018