A company issued 10-year,8% bonds with a par value of $200,000.The company received $190,000 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:
A)$8,000.00
B)$8,500.00
C)$16,000.00
D)$7,500.00
E)$18,000.00

Question

Quizplus · Accepted Answer

The semiannual interest payment is $8,000 (4% of $200,000). The discount on the bonds is $10,000 ($200,000 - $190,000), which is amortized over 20 periods (10 years x 2). The semiannual amortization is $500 ($10,000 / 20). Therefore, the interest expense is $8,500 ($8,000 + $500).

A Company Issued 10-Year,8% Bonds with a Par Value of $200,000.The