Assume the current carrying amount of bonds payable is $306,850,and the par value of the bonds is $300,000.The contract rate is 10%,and the effective rate of interest is 9%.The effective-interest method of amortization is used and interest is paid semiannually.The next journal entry to record the interest payment and amortization includes a debit to interest expense for:

Question

Quizplus · Accepted Answer

The semiannual interest payment can be calculated as ($300,000 x 10% x 6/12) = $15,000. 
Using the effective-interest method, the amortization of bond premium for the first payment can be calculated as ($306,850 - $300,000) x 9%/2 = $3,425. 
Therefore, the debit to interest expense should be $15,000 + $3,425 = $13,808. The correct answer is B.

Assume the Current Carrying Amount of Bonds Payable Is $306,850,and