Oliver Company issued $800,000 of 6%, 5-year bonds at 98. Assuming straight-line amortization and annual interest payments, how much bond interest expense is recorded on the next interest date?

Question

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The bond discount is $16,000 ($800,000 x 2%). Amortization per year is $3,200 ($16,000 / 5 years). Annual interest payment is $48,000 ($800,000 x 6%). Total interest expense is $51,200 ($48,000 + $3,200).

Oliver Company Issued $800,000 of 6%, 5-Year Bonds at 98