Question

Franklin corporation issues $97,000, 8%, 5-year bonds on January 1, for $101,370. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is:________.
a. $4,317
b. $7,760
c. $3,443
d. $3,880

Answer 1

Answer:

c. $3,443

Explanation:

Date     Account Titles                              Debit      Credit

Jan 1     Cash                                              101370

                  Bond payable                                          97000

                  Premium on issue of bonds                    4,370

                   (101370-97000)

Jul 1        Interest expenses (3680 - 437)  3,443

              Premium on issue on bond         437

              (4379/5 * 6/12)

                     Cash (97,000*8%*6/12)                          3,800