On January 1, 2021, Winter Company issued $500,000, 5-year, 8% bonds at 97. Interest is paid...

On January 1, 2021, Winter Company issued $500,000, 5-year, 8% bonds at 97. Interest is paid semiannually on each June 30 and December 31. The maturity date is December 31, 2025. How much Bond Interest Expense will the company record on each semiannual cash interest payment date?

Solutions

Expert Solution

Interest expense to be reported = $21,500

Working

Bond issue price (500000/100 x 97)	$ 485,000.00
Face value	$ 500,000.00
Discount on bonds payable	$ 15,000.00
Number of Interest payments (5 years x 2)	10
Discount to be amortized per Half year	$ 1,500.00
Cash Interest on bond (15000 x 4%)	$ 20,000.00
Interest expense to be recorded (20000+1500)	$ 21,500.00

ekkarill92 answered 1 year ago

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