Question

On January 1, 2018, Jahi Company issued $400,000, 10-year, 10% coupon rate bonds for $354,200. The...

On January 1, 2018, Jahi Company issued $400,000, 10-year, 10% coupon rate bonds for $354,200. The bonds pay interest on June 30 and December 31. Using straight line amortization, the interest expense on the bonds on June 30, 2018, is

A. $20,000 B. $24,000 C. $22,290 D. $17,710

Why C?

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Answer #1
Interest Expense = 20000 400000*5%
Amortization of discount 2290 (400000-354200)/20
Total interest expense 22290
If a bond is issued at less than its face value then apart from the actual interest the amortized discount is also charged in the profit and loss
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