The Mesino Corporation issues $80,000, 5%, 5-year bonds on January 1, for $83,200. Interest is paid...

The Mesino Corporation issues $80,000, 5%, 5-year bonds on January 1, for $83,200. Interest is paid semiannually on January 1 and July 1. If Mesino uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

	a.	$2,000
	b.	$4,000
	c.	$1,680
	d.	$3,360

Expert Solution

Correct Option C i.e. $1680

Interest Payment	2,000	(800005%)6 Months/12 Months
Less: AMORTIZATION OF PREMIUM	(320)	(Note1 )

Interest Expense to be recognized	1,680


Note 1:

Calculation of Premium amount

Issue Value	83,200
Less: face Value	80,000

Premium Amount	3,200

No. of Semiannual	10

Amortization of premium per semiannual	320	(3200/10)

ekkarill92 answered 2 years ago

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