Winrow Company received proceeds of $754,000 on 10-year, 8% bonds issued on January 1, 2019.The bonds had a face value of $800,000, pay interest annually on December 31, and have a call price of 101.Winrow uses the straight-line method of amortization.What is the amount of interest expense Winrow will show with relation to these bonds for the year ended December 31, 2019?
A)$64,000
B)$60,320
C)$68,600
D)$59,400

Question

Quizplus · Accepted Answer

The annual interest payment is 8% of $800,000, which is $64,000. The discount on the bonds is $800,000 - $754,000 = $46,000. Using straight-line amortization over 10 years, the annual amortization is $46,000 / 10 = $4,600. Therefore, the interest expense is $64,000 + $4,600 = $68,600.

Winrow Company Received Proceeds of $754,000 on 10-Year, 8% Bonds