On January 1, 2010, Jacob issues $890,000 of 9%, 10 year bonds at a price of 92.5. Six years later on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 10.5. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the total interest expense for the life of the bond?

a.) $801,000
b.) $867,750
c.) $866,750
d.) $823,250
e.) $938,950

Quote:

---

Originally Posted by acct_sfsu

on january 1, 2010, Jacob issues $890,000 of 9%, 10 year bonds at a price of 92.5. Six years later on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 10.5. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the total interest expense for the life of the bond?

a.) $801,000
b.) $867,750
c.) $866,750
d.) $823,250
e.) $938,950

---

It seems the devil is in the detail. Prima face interest $801,000 Discount $66,750 I'll leave the rest to you because it looks like a decimal point is in the wrong place in the second transaction