ageNOwv2 OnlirGChapter 14 Acct TF Flashca tion issues 9700 o

ageNOwv2 |OnlirGChapter 14 Acct T/F Flashca tion issues $97,00+ on issues $97,000, 896, 5-year bonds on January 1, for $101,370. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, determine the amount of bond interest expense to be recognized on July 1. Select the correct answer O$7,760 O$3,443 o $4,317 O$3,880

Solution

Correct answer is option C.$3443

Calculation of Interest expenses to be recognized

Total cash to be paid period of 6 month =97,000*4%= $3,880

Amortization of premium per period=[101,370-97,000]/10 =$437

So Interest expenses to be recognized on July 1st = $3880-$437 =$3443