Acme Corporation issues $500,000, 10%, 5-year bonds on January 1, for $479,000. Interest is paid annually on January 1. If Acme uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at year-end would be:

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The annual interest payment is $50,000 (10% of $500,000). The bond discount is $21,000 ($500,000 - $479,000), which is amortized over 5 years, resulting in $4,200 per year. Therefore, the total interest expense is $50,000 + $4,200 = $54,200.

Acme Corporation Issues $500,000, 10%, 5-Year Bonds on January 1