Jones Company issued bonds with a $160,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 8.50% stated rate of interest that is payable in cash on December 31^st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information:The amount of interest expense shown on Jones's December 31, Year 1 income statement would be:

Question

Quizplus · Accepted Answer

The correct answer is A because the amount of interest expense shown on Jones's December 31, Year 1 income statement would be $14,560. This is calculated by multiplying the face value of the bonds by the stated rate of interest and then multiplying that result by the fraction of the year that the bonds were outstanding. In this case, the face value of the bonds is $160,000, the stated rate of interest is 8.50%, and the bonds were outstanding for 12/12 of the year. Therefore, the amount of interest expense shown on Jones's December 31, Year 1 income statement would be $14,560.

Jones Company Issued Bonds with a $160,000 Face Value on January