# On January 1, the Kings Corporation issued 10% bonds with a face value of $98,000. The bonds are sold for $96,040. The bonds

###### Question:

## Answers

$9,996

Explanation:

The bond is issued on discount when the issuance price is lower than the face value of the bond. The discount on the bond will be expensed over the bond period until maturity.

Discount on Bond = Face value - Issuance value = $98,000 - $96,040 = $1,960

Interest Expense includes the interest payment and the discount amortization.

Discount amortization = Discount value / Life of the bond = $1,960 / 10 = 196 per year = $98 semiannually

Interest Payment = $98,000 x 10% = $9,800 annually = $4,900 semiannually

Interest Expense = ( 4,900 + 98 ) x 2 = $9,996

The correct answer is $9,800

Explanation:

Solution:

Recall that

Kings Corporation issued bonds of = 10%

Face value = $98,000

Bonds sold for = 96,040

Determine the bond interest expense for the year ended December 31 of the first year

Now,

$98,000 * 10 bond = 9,800

Therefore, the bond interest expense for the year ended December 31 of the first year is + $9,800