Applegate Corporation sells $150,000,5%,10-year bonds for 96 on January 1.Interest is paid on January 1 and July 1.Straight-line amortization is used.The amount of interest expense recorded on July 1,six months after issuance is:

Question

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The bond discount is $6,000 ($150,000 x 4%). The annual amortization is $600 ($6,000 / 10 years). For six months, it is $300. The cash interest payment is $3,750 ($150,000 x 5% x 6/12). Therefore, the interest expense is $4,050 ($3,750 + $300).

Applegate Corporation Sells $150,000,5%,10-Year Bonds for 96 on January 1