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 company uses the straight-line method to amortize the discount. The amount of the interest payment on June 30 is $25,000.
Interest Expense = Cash Paid + Discount Amortization
Interest Expense = ($500,000 * 10% * 6/12) = $25,000

Question

Quizplus · Accepted Answer

The calculation for the interest payment on June 30 is correct. The formula for interest expense is also correctly stated as "Interest Expense = Cash Paid + Discount Amortization."

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