On January 1, 2019, Chin Corporation issued $ 3 comma 200 comma 000 , 14 %, 5 minus year bonds. The bond interest is payable on January 1 and July 1. The bonds sold for $ 3 comma 419 comma 600. The market rate of interest for these bonds was 12 %. Under the effective minus interest method, what is the interest expense for the six months ending July 1, 2019?

interest expense 205,176 debit

premium on BP 18824 debit

cash 224,000 credit

--to record first interest payment--

Explanation:

procceds 3,419,600

face value (3,200,000)

premium on bonds payable 219,600

semiannual bond rate 14% / 2 = 0.07

semiannual market rate 12% / 2 = 0.06

For the cash outlay we do face vbalue x bond rate

For the interest expense we do carrying value x market rate

the difference will be the amortization

3,419,600 x 6% = 205,176

3,200,000 x 7% = 224,000

amortization 18,824