A corporation issues $500,000, 8%, 10-year bonds on January 1, 2015 for $479,000. 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 on December 31, 2015 is

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The bond discount is $21,000 ($500,000 - $479,000). Over 10 years, the annual amortization is $2,100 ($21,000 / 10). The annual interest payment is $40,000 (8% of $500,000). Therefore, the bond interest expense is $42,100 ($40,000 + $2,100).

A Corporation Issues $500,000, 8%, 10-Year Bonds on January 1