Bond interest expense reported on the December 31, 2014 income statement of Bartley Corporation would be

Question

Quizplus · Accepted Answer

To determine the bond interest expense reported on the income statement, we need to calculate the interest payment on the outstanding bonds for the period.

According to the problem, Bartley Corporation issued $1,000,000 of 10-year, 8% bonds on January 1, 2014.

The total interest payment for the year is calculated as: 
$1,000,000 (bond principal) x 8% (interest rate) = $80,000

Since the interest is paid semi-annually, the interest payment for each period is: 
$80,000 / 2 = $40,000

Therefore, the bond interest expense reported on the income statement for the year ended December 31, 2014 would be: 
2 x $40,000 = $80,000 
However, the company only paid interest on the bonds for half the year, from January 1, 2014 to June 30, 2014. Therefore, the interest expense reported on the income statement would be half of the total interest payment for the year:

$80,000 / 2 = $40,000

Subtracting the interest payment made for the first six months ($40,000), we get:

$40,000 - $2,500 = $37,500

Adding the amortization of the bond discount for the year ($20,000), we get:

$37,500 + $20,000 = $57,500

Therefore, the answer is C: $57,500.

Bond Interest Expense Reported on the December 31, 2014 Income