Lassen Corporation issued ten-year term bonds on January 1,20x5,with a face value of $800,000.The face interest rate is 6 percent and interest is payable semiannually on June 30 and December 31.The bonds were issued for $690,960 to yield an effective annual rate of 8 percent.The effective interest method of amortization is to be used.The entry to record the bond interest expense on the first interest payment date is: (Round answer to the nearest dollar. )

Question

Quizplus · Accepted Answer

The semiannual interest payment is calculated as $800,000 x 6% x 6/12 = $24,000. 
The effective interest for the first period is calculated as $690,960 x 8% = $55,277. 
The bond interest expense for the first period is $55,277 - $24,000 = $31,277. 
Therefore, the entry to record the bond interest expense on the first interest payment date is:
Interest Expense               31,277
Cash                                24,000
Discount on Bonds Payable 7,277

Lassen Corporation Issued Ten-Year Term Bonds on January 1,20x5,with a Face