Schmid Corporation issues $500,000,10%,5-year bonds on January 1,2014 for $479,000.Interest is paid semiannually on January 1 and July 1.If Schmid uses the straight-line method of amortization of bond discount,the amount of bond interest expense on July 1,2014 is:

Question

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The bond discount is $21,000 ($500,000 - $479,000). Over 5 years, with semiannual payments, there are 10 periods. The discount amortization per period is $2,100 ($21,000 / 10). The cash interest payment is $25,000 ($500,000 * 10% / 2). Therefore, the bond interest expense is $27,100 ($25,000 + $2,100).

Schmid Corporation Issues $500,000,10%,5-Year Bonds on January 1,2014 for $479,000