Question

On January 1, Elias Corporation issued 9% bonds with a face value of $53,000. The bonds are sold for $51,410. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 10 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

Answer 1

The bond interest expense for the year ended December 31 of the first year is $4,929

Step-by-step explanation:

In order to calculate bond interest expense for the year ended December 31 of the first year we would need to calculate first the Interest Expense and the Amotization Expense as follows:

Elias Corporation issued 9% bonds with a face value of $53,000, therefore the Interest Expense = $53,000 * 9% = $4,770

The bonds are sold for $51,410 and the maturity date is December 31, 10 years from now,

Therefore Amotization Expense = ( $53,000 - $51,410) / 10 years = $159

After having calculated the Interest Expense and the Amotization Expense we can calculate the Total Bond Interest Expense as follows:

Total Bond Interest Expense = $4,770 + $159 = $4,929