11. A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The bond interest expense for the first interest payment would be calculated as follows:1. **Calculate the Semiannual Interest Payment:** - Face value of bond = $400,000 - Semiannual interest rate = 9% / 2 = 4.5% - Semiannual interest payment = $400,000 * 4.5% = $18,0002. **Calculate the Premium Amortization Per Period:** - Premium on bonds = $440,000 - $400,000 = $40,000 - Number of periods (10 years * 2) = 20 - Premium amortization per period = $40,000 / 20 = $2,0003. **Calculate Bond Interest Expense:** - Bond interest expense = Semiannual interest payment - Premium amortization - Bond interest expense = $18,000 - $2,000 = $16,000Therefore, the bond interest expense for the first interest payment would be $16,000.

Premium on bonds payable = Issue price - Face value of bonds = $440000 - $400000 = $40000

A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The bond interest expense for the first interest payment would be 11.

A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The bond interest expense for the first interest payment would be 11.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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