Asked by
Arîvølèé Nêhrû
on Nov 18, 2024
Verified
On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is
A) $5,000
B) $5,200
C) $5,800
D) $5,400
Straight-Line Amortization
Straight-line amortization is a method of gradually reducing the book value of an intangible asset over a fixed period of its useful life.
Bond Interest Expense
The periodic expense incurred by an issuer of bonds as payment to the bondholders for their investment, typically paid semi-annually.
Face Value
The nominal value printed on a financial instrument such as a bond or stock certificate, representing its legal value.
- Depict the accounting entries for the issuance of bonds, the disbursement of bond interest, bond discount/premium amortization strategies, and the redemption process.
- Acquire insight into the practices for the amortization of bond discount and premium and its repercussions on the cost associated with interest.
- Gauge the financial income from the launch of bonds and the carrying cost of the bond during its period of maturity.
Verified Answer
AA
Learning Objectives
- Depict the accounting entries for the issuance of bonds, the disbursement of bond interest, bond discount/premium amortization strategies, and the redemption process.
- Acquire insight into the practices for the amortization of bond discount and premium and its repercussions on the cost associated with interest.
- Gauge the financial income from the launch of bonds and the carrying cost of the bond during its period of maturity.