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Franklin corporation issues $50,000, 10%, five-year bonds on january 1 for $52,100. interest is paid semiannually on january 1 and july 1. if franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on july 1 is

Respuesta :

Answer:

Amount of interest expenses to be recognized on July 1 =   $50,000 x 10% x 6/12  =  $2,500

Explanation:

jepessoa

Answer:

$2,290

Explanation:

Since Franklin sold their bonds at a premium (higher than face value), they must discount the premium from their interest expense.

total interest expense = coupon paid - amortization of bond premium

  • coupon = $50,000 x 10% x 1/2 = $2,500
  • amortization of bond premium = ($52,100 - $50,000) / 10 periods = $2,100 / 10 = $210

total interest expense = $2,500 - $210 = $2,290

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