NBC Corporation issued $620,000, 10%, 5-year bonds on January 1, 2017 for $670,288 when the market interest rate was 8%. Interest is paid semiannually on January 1 and July 1. The corporation uses the effective-interest method to amortize bond premium. The total amount of bond interest expense recognized on July 1, 2017 is:

Question

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The bond interest expense is calculated using the effective interest rate method. The carrying amount of the bond at issuance is $670,288, and the market interest rate is 8% annually, or 4% semiannually. Therefore, the interest expense for the first semiannual period is $670,288 * 4% = $26,812.

NBC Corporation Issued $620,000, 10%, 5-Year Bonds on January 1