Schmid Corporation issues $540,000, 8%, 5-year bonds on January 1, 2017 for $489,000. Interest is paid semiannually on January 1 and July 1. If Schmid uses the straight-line method of amortization of bond discount, the amount of bond interest expense on July 1, 2017 is:

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The bond discount is $540,000 - $489,000 = $51,000. Over 5 years (10 periods), the amortization per period is $51,000 / 10 = $5,100. The semiannual interest payment is ($540,000 * 8% * 1/2) = $21,600. Therefore, the bond interest expense is $21,600 + $5,100 = $26,700.

Schmid Corporation Issues $540,000, 8%, 5-Year Bonds on January 1