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Dublin Company sold$1,200,000 of 8%,10-year bonds at 97 on January 1,2021.The bonds were dated January 1,2021...

Dublin Company sold$1,200,000 of 8%,10-year bonds at 97 on January 1,2021.The bonds were dated January 1,2021 and pay interest on June 30 and December 31.If Dublin uses the
straight-line amortization,what would the total interest expense recognized for the bond issue over its full term?

Solutions

Expert Solution

Discount on issue of bonds = Par value of bonds - Cash received from issuance of bonds

Discount on issue of bonds = $1,200,000 - ($1,200,000 * 0.97)

Discount on issue of bonds = $36,000

Total Interest Expenses recognized for the bond issue over its full term = Discount + Interest paid in cash

Total Interest Expenses recognized for the bond issue over its full term = $36,000 + ($1,200,000 * 0.08 * 10)

Total Interest Expenses recognized for the bond issue over its full term = $996,000

jeff jeffy answered 2 years ago
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