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Sun Corp. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1,...

Sun Corp. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1, 2015. The bonds were dated January 1, 2015, and pay interest on July 1 and January 1. Determine the amount of interest expense to be reported on July 1, 2015, and December 31, 2015.

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Answer #1

Interest expense reported on July 1, 2015 = 132788.75 or 132789 (rounded off)

Interest expense reported on December 31, 2015 = 132,553.188 or 132553 (rounded off)

Carrying amount = 2500000*106.231/100 = 2,655,775

Date Interest paid Interest expense
[Carrying amount *5%]		 Premium amortized
[Cash received - interest receivable]		 Carrying Amount of Investment
Jan 2015 2,655,775.000
July 2015 137500 132788.750 4711.2500 2,651,063.750
Dec 2015 137500 132553.188 4946.8125 2,646,116.938
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