On January 1, 2014, Bentley Company issued £25,000,000, 5-year, 7% bonds, were issued for £24,625,000. Interest is paid annually on December 31. Bentley uses the straight-line method to amortize discount on bonds payable The amount of bond interest expense reported on the 2014 income statement will be

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The bond interest expense includes the annual interest payment plus the amortization of the discount. The annual interest payment is £25,000,000 * 7% = £1,750,000. The discount on bonds payable is £25,000,000 - £24,625,000 = £375,000. Using the straight-line method, the annual amortization of the discount is £375,000 / 5 = £75,000. Therefore, the bond interest expense for 2014 is £1,750,000 + £75,000 = £1,825,000.

On January 1, 2014, Bentley Company Issued £25,000,000, 5-Year, 7