Trego Company issued, payable on 31 December, 2014, $10,000,000 face value, 4%, 5-year bonds. Interest will be paid semiannually each 30 June and 31 December. The bonds sold at a price of 102; Trego uses the straight-line method of amortizing bond discount or premium.
-The amount of bond interest expense recognized by Trego Company in 2015 with respect to these bonds is:

Question

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The bonds were sold at a premium (102% of face value), so the premium is $200,000 ($10,000,000 x 2%). The premium is amortized over 5 years (10 periods), resulting in $20,000 amortization per period. The annual interest payment is $400,000 ($10,000,000 x 4%). The bond interest expense for 2015 is $400,000 - $20,000 = $380,000 per period, totaling $440,000 for two periods.

Trego Company Issued, Payable on 31 December, 2014, $10,000,000 Face