Question

Schmid Corporation issues​ $450,000, 12%, 5minusyear bonds on January​ 1, 2019 for​ $439,000. Interest is paid semiannually on January 1 and July 1. If Schmid uses the straightminusline method of amortization of bond​ discount, the amount of bond interest expense on July​ 1, 2019​ is:

Answer 1

$28,100

Step-by-step explanation:

The computation of the bond interest expense is shown below:

= (Issued amount × interest rate) + (Issued amount - given amount) ÷ time period

= ($450,000 × 6%) + ($450,000 - $439,000) ÷ 10 years

= $27,000 + $1,100

= $28,100

In semi annual period, the interest rate is half and the time period is doubles and the same is shown