On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is
A) $5,000
B) $5,200
C) $5,800
D) $5,400

Question

Quizplus · Accepted Answer

Bond interest expense = {[(Face value of bonds × 10% × 1/2 year)] + [Discount on issue ÷ (10 years × 2)]} × 2 = {[$50,000 × 10% × 1/2 year] + [($50,000 - $46,000) / (10 years × 2)]} × 2 = $5,400

On January 1, the Elias Corporation Issued 10% Bonds with a Face