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26 March, 05:36

Kimble Electronics issued its 6%, 20-year bonds payable at a price of $855,000 (face value is $900,000). The company uses the straight-line amortization method for the bond discount or premium. Interest expense for the first year is:

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  1. 26 March, 05:44
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    Interest expense for the first year is: $56,250

    Solution:

    Kimble Electronics issued = 6%, 20-year bonds payable

    The corporation follows the straight-line amortization approach for the discount or premium on debt.

    $900,000 - $855,000 = $45,000

    $45,000/20 years = $2,250 per year

    $900,000 * 0.06 = $54,000

    $2,250 + $54,000 = $56,250 interest expense.
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