Question

On January 1, the Elias Corporation issued 10% bonds with a face value of $99,000. The bonds are sold for $97,020. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is. a.$10,098 b.$9,900 c.$9,702 d.$1,980

Answer 1

The bond interest expense for the year ended December 31 of the first year is $990.

Step-by-step explanation:

To calculate the bond interest expense for the year ended December 31 of the first year, we need to determine the bond discount and the number of interest payments made during the year. The bond discount is the difference between the face value of the bond ($99,000) and the selling price ($97,020), which is $1,980. Since the bonds pay interest semiannually, there would be two interest payments made during the year. The bond interest expense would be the bond discount divided by the number of interest payments, which is $1,980 / 2 = $990.