On January 1,2018,Global Sales issued $25,000 in bonds for $29,800.These are eight-year bonds with a stated rate of 15% and pay semiannual interest.Global Sales uses the straight-line method to amortize the bond premium.On June 30,2018,when Global makes the first payment to bondholders,what is the amount that will be reported as Interest Expense? (Round your intermediate answers to the nearest dollar.)

Question

Quizplus · Accepted Answer

The bond premium is $4,800 ($29,800 - $25,000). Over 16 periods (8 years, semiannual), the premium amortization per period is $300 ($4,800 / 16). The cash interest payment is $1,875 ($25,000 * 15% / 2). The interest expense is the cash interest payment minus the premium amortization: $1,875 - $300 = $1,575.

On January 1,2018,Global Sales Issued $25,000 in Bonds for $29,800