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On October 1 2017 Sunland Company issued 4 10 year bonds with a face value of $6110000 at 104 Interest is paid on October 1 and April 1 with any premiums or discounts amortized on a straight line basis Bond interest expense reported on the December 31 2017 income statement of Sunland Company would be:

Respuesta :

TomShelby

Answer:

The income statment will list

  • Interest expense 219,960

Explanation:

face value 6,110,000

issued at 104

[tex]Principal \times\frac{issued\: points}{100}  = cash \:proceeds\\6,110,000 \times\: \frac{104}{100} = 6,354,400[/tex]

Premium 244,400

Straight line method

[tex]\frac{Premium}{total \: payments} = amortization\: per \: payment[/tex]

It's life is 10 years. It makes 2 payment per year. Total payment 20

244,400/20 = 12,220

Cash disbursements per payment

6,110,000 x 2% = 122,200

premium amortization 12,220

Interest expense per payment 109,980

Total interest expense per year 219,960 (there are two payment per year)

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