213. Hooke Company received proceeds of $377,000 on 10-year, 8% bonds issued on January 1, 2017. The bonds had a face value of $400,000, pay interest annually on June 30 and December 31, and have a call price of 101. Hooke uses the straight-line method of amortization. What is the amount of interest expense Hooke will show with relation to these bonds for the year ended December 31, 2018? A) $32,000 B) $30,160 C) $34,300 D) $29,700

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Quizplus · Accepted Answer

The annual interest payment is $32,000 (8% of $400,000). The discount on the bonds is $23,000 ($400,000 - $377,000), which is amortized over 10 years, resulting in an annual amortization of $2,300. Therefore, the interest expense for 2018 is $32,000 + $2,300 = $34,300.