235. Hooke Company received proceeds of $377,000 on 10-year, 8% bonds issued on January 1, 2014. The bonds had a face value of $400,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Hooke uses the straight-line method of amortization. What is the amount of interest expense Hooke will show with relation to these bonds for the year ended December 31, 2015?

Question

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The annual interest expense includes the cash interest paid and the amortization of the bond discount. The cash interest is $32,000 (8% of $400,000), and the annual amortization of the discount is $2,300 (($400,000 - $377,000) / 10 years), totaling $34,300.