On July 1,2019,Brownlee Corporation issues $1,200,000 of 10-year,9% bonds dated July 1,2019 at 88.Brownlee uses the straight-line method of amortization.Interest is paid each July 1 and January 1.Brownlee Corporation's fiscal year end is June 30.The interest expense recognized for the first semiannual interest payment on January 1,2020 is:

Question

Quizplus · Accepted Answer

1,200,000 × 0.88 = 1,056,000 selling price of bonds
1,200,000 - 1,056,000 = 144,000 discount
144,000 ÷ 20 (10 years × 2 payments per year)= 7,200 discount amortization per period
1,200,000 × 0.09 × 6/12 = 54,000 cash paid
Interest Expense = Cash Paid + Amortized Discount = 54,000 + 7,200 = 61,200

On July 1,2019,Brownlee Corporation Issues $1,200,000 of 10-Year,9% Bonds Dated