Jared Company issued 6%, 5-year bonds, with par value of $800,000, paying semiannual interest, for $745,464. The annual market rate of interest on the date of issue was 8%.
Assuming effective interest method of amortization, calculate the bond interest expense on the first interest payment date.

Question

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The correct answer is A.The bond interest expense on the first interest payment date is $29,819. This is calculated as follows:Bond interest expense = (Carrying value of bonds x Annual market rate of interest) / 2Carrying value of bonds = $745,464Annual market rate of interest = 8%Bond interest expense = ($745,464 x 8%) / 2= $29,819

Jared Company Issued 6%, 5-Year Bonds, with Par Value of $800,000