Hooker Company sells $200,000 of ten-year,8% bonds to yield 10% on January 1,2014.The bonds pay interest annually on December 31.The bonds were sold at a discount of $24,578.The amount of bond interest expense for 2015 is
A)$16,000.
B)$17,696.
C)$18,458.
D)$19,280.

Question

Quizplus · Accepted Answer

To calculate bond interest expense, we need to find the interest payment for the year and the amortization of the discount.

Interest payment for the year = face value of the bond x coupon rate = $200,000 x 8% = $16,000

Amortization of discount = Discount on bond / Number of years to maturity = $24,578 / 10 = $2,458

Bond interest expense for 2015 = Interest payment for the year + Amortization of discount = $16,000 + $2,458 = $17,696

Therefore, the answer is B) $17,696.

Hooker Company Sells $200,000 of Ten-Year,8% Bonds to Yield 10