Linen Corp. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1,...

Linen Corp. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1, 2015. The bonds were dated January 1, 2015, and pay interest on July 1 and January 1. Determine the amount of interest expense to be reported on July 1, 2015, and December 31, 2015.
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Expert Solution

Bond
Sold	$ 2,500,000	25000	Price	106.231
Coupon	11%		Face Value	100
	10Years		Premium	6.231
Yield	10%		Premium Amount	$ 155,775
July ,1,2015
Interest Rate - Semi Annual	5.50%		Carring amount of Bond	$ 2,655,775
Interest Cost	$ 137,500	Actual	Interest on Carring amount	$ 132,789
Premium Amortised	$ 4,711		( @ 5% semi- annual yield Rate)
( Interest cost cash - Interest on Carring Amount)

December ,31,2015
Interest Rate - Semi Annual	5.50%		Carring amount of Bond	$ 2,655,775
Interest Cost	$ 137,500	Actual	Less: Premium Amortised	$ 4,711
Premium Amortised	$ 4,947		Net Carring Amount	$ 2,651,064
( Interest cost cash - Interest on Carring Amount)		Interest on Carring amount	$ 132,553
			( @ 5% semi- annual yield Rate)

ekkarill92 answered 6 months ago

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