Rowan Corporation issued ten-year term bonds on January 1,2013,with a face value of $400,000.The face interest rate is 6 percent and interest is payable semi-annually on June 30 and December 31.The bonds were issued for $345,480 to yield an effective annual rate of 8 percent.The effective interest method of amortization is to be used.The entry to record the bond interest expense on the first interest payment date is: (Round answer to the nearest dollar.)

Question

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The bond interest expense is calculated using the effective interest rate method: $345,480 (carrying amount) * 4% (semi-annual effective rate) = $13,819. The cash paid is $12,000 (6% of $400,000 / 2). The difference of $1,819 is the amortization of the bond discount.

Rowan Corporation Issued Ten-Year Term Bonds on January 1,2013,with a Face