On January 1, 2013, Kaiser Permanente issued $2,000,000 of 8% bonds at par. These bonds are due in 10 years with interest payable semi-annually on June 30 and December 31. What is the amount of the interest expense in 2013 assuming the use of the effective interest amortization method?

Question

Quizplus · Accepted Answer

The amount of interest expense in 2013 can be calculated as follows:
- Total interest payment for 2013 = $2,000,000 x 8% x 6/12 = $80,000
- Amortization of bond discount for 2013 = ($80,000 - $80,000) = $0
Therefore, the amount of interest expense in 2013 is equal to the total interest payment for 2013, which is $80,000.

On January 1, 2013, Kaiser Permanente Issued $2,000,000 of 8