On January 1, 2017, Babb Trailers, Inc. issued $6,500,000 of par value bonds for $6,200,000. The bonds pay interest semiannually on January 1 and July 1. The contract rate of interest is 3% while the market rate of interest for similar bonds is 5%. The bond premium or discount is being amortized at a rate of $10,000 every six months. The amount of interest expense recognized by Babb Trailers, Inc. on the bond issue for the entire year of 2017 would be:     $215,000     $117,500     $107,500     $206,000

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A: Par value of bonds$90,000Less: Proceed received$85,431Discount ($90,000 - $85,431)$4,569

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Q: On January 1, 2017, Babb Trailers, Inc. issued $6,500,000 of par value bonds for $6,200,000. The…

A: Total discount on issue of bonds = Face value of bonds - Issue value = $6,500,000 - $6,200,000 =…

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