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9 January, 14:22

On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten 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. $5,000 b. $5,200 c. $5,800 d. $5,400

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Answers (1)
  1. 9 January, 15:57
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    d. $5,400

    Explanation:

    The computation of the interest expense is shown below:

    As

    Interest Expense is

    = $50,000 * 10%

    = $5,000

    And,

    Amortization Expense is

    = ($50,000 - $46,000) : 10 years

    = $400

    So,

    Total Bond Interest Expense is

    = Interest expense + amortization expense

    = $5,000 + $400

    = $5,400

    We simply added the interest expense and the amortization expense so that the total bond interest expense could come
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Home » Business » On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now.
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