On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.
Total interest expense recognized is ($500,000 * 10% * 8 years) + discount ($26,155) = $426,155.

Question

Quizplus · Accepted Answer

The calculation for total interest expense recognized is incorrect. It should be ($500,000 * 10% * 8 years) - discount ($26,155) = $373,845, which is different from the given total interest expense of $400,000.

On January 1, a Company Issued a $500,000, 10%, 8-Year