[laurac]

A company issued 5-year bonds with a par value of $100,000. The company received $97,947 for the bonds. Using the straight-line method, the amount of interest expense for the frist semiannual interest period is:

I got $ 32,947 by 35,000+2,053.

I have a few others like this.. it is not homework that I have due but a test I took that I want to check the answers and try to figure it out.. it is online and it is hard to understand!
Thanks!

[morgaine300]

The 2053 is not correct. Amortizing by the straight-line method means dividing it up equally among the total number of periods. If these are 5 year bonds and interest is paid semi-annually, how many total payment periods do you have? For one payment period, you need only one period's worth of amortization of the discount. You've expensed the entire discount.

As for the interest amount, I have no idea because you didn't give any information about the actual interest payments. I do know it wouldn't be any 32K because bonds would never pay that much interest. My suspicions, based on what you did with the amortization, are that you lumped all the interest payments together and charged it all off at once. It only wants ONE interest payment.

[laurac]

Do you know how you would get the answer from the information in the question.. that is all the information I have other than 5 multiple choice answers!! I did forget 5- year 7% bonds with a par value of 100,000

3,294.7
3,500.00
3,705.30
7,000.00
7,410.60

I have about 6 other questions to about accounting if you had the time and wouldn't mind!Thank you so much!

[morgaine300]

If the bonds are 7% per year, how much is interest for a half year? That's your first semi-annual interest payment. Because it asks for the expense, that means it wants the amortization of the discount included. I already gave you some information in my other post about how to figure that out. I'd like to see you make a second attempt at doing it based on that information.

As to your other questions, please keep in mind everyone here is volunteers, and we come on when we have time and get to what we can. If I happen to be on and see your questions and have time to answer them, I will do so. But I don't make guarantees about when I may or may not be here -- and other people need help too.

[Kumar1111]

I guess the answer could be $3705.30 i.e. 3500 as first semiannual interest and 205.3 as 1/10 of 2053 considering there are total 10 semiannual installments. Thanks

[laurac]

Thank you very much I think I get what your saying about the 10 installments!

[ehstt]

If someone has an equipment that cost $94,000 what would be the adjusted amortization for the first month at 20%.

[morgaine300]

Can you please start your own thread instead of tacking it onto a year-old thread of a different stubject.

[ayl1984]

How do you calculate the interest expense for bonds issued at a discount or premium using the straight-line method?