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A company issues $16400000, 9.8%, 20-year bonds to yield 10% on January 1, 2017. Interest is...

A company issues $16400000, 9.8%, 20-year bonds to yield 10% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $16118591. What is interest expense for 2018, using straight-line amortization?

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Face value of bonds $                                     16,400,000
Issue price of bonds $                                     16,118,591
Discount on bonds payable $                                           281,409
The discount is to be amortized over 40 semi annual periods
Amortization of discount per period 281409 ÷ 40
$                                          7,035.23
Payment of cash interest $                                           803,600 (16400000 x 9.8% x 1/2)
Journal entry for interest
June 30, 2018 Interest Expense $                       810,635.23
Discount on bonds payable $      7,035.23
Cash $ 803,600.00
Dec 31, 2018 Interest Expense $                       810,635.23
Discount on bonds payable $      7,035.23
Cash $ 803,600.00
Interest Expense 2018 $                                  1,621,270.45 (810635.23 x 2)

ekkarill92 answered 2 years ago
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