On January 1,2013,Jacob issues $600,000 of 11%,15-year bonds at a price of 102½.The straight-line method is used to amortize any bond premium or discount.What is the total interest expense for the life of these bonds?
A)$975,000
B)$964,000
C)$936,000
D)$772,000
E)$990,000

Question

Quizplus · Accepted Answer

The total interest expense for the life of the bonds is $975,000. The bonds were issued at a premium, so the interest expense will be less than the total amount of interest paid. The straight-line method of amortization will result in an equal amount of interest expense being recognized each year.

On January 1,2013,Jacob Issues $600,000 of 11%,15-Year Bonds at a Price