Multiple Choice Question 209 A corporation issues 460000 9 1

Multiple Choice Question 209

A corporation issues $460000, 9%, 10-year bonds on January 1, 2018 for $438000. Interest is paid annually on January 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on December 31, 2018 is

$41400.

Solution

Annual discount amortization = (460000-438000)/10= $2200 Bond interest expense to be recognized = (460000*9%)+2200= $43600 Option 3 is correct