A corporation issues $300,000, 10%, 5-year bonds on January 1, 2017, for $287,400. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2017's adjusting entry is

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The bond discount is $12,600 ($300,000 - $287,400) and will be amortized over 5 years with $2,520 ($12,600 ÷ 5) being recognized each year. Since the interest payment is made on January 1, 2017, the amount of bond interest expense recognized in the 2017 adjusting entry is $30,000 ($300,000 x 10% x 1/1 year) minus the amount of interest paid in cash of $2,520 ($300,000 x 10% x 1/12 year). Therefore, the amount of bond interest expense to be recognized in December 31, 2017's adjusting entry is $30,000 - $2,520 = $27,480.

A Corporation Issues $300,000, 10%, 5-Year Bonds on January 1