38) Trent Corp. issued $800,000 of 8%, 5-year bonds at 102 on January 1, 2017. The...

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38) Trent Corp. issued $800,000 of 8%, 5-year bonds at 102 onJanuary 1, 2017. The straight-line method of amortization is usedand the bonds pay interest annually on January 1. The amount ofbond interest expense that Trent should report on its December 31,2017, income statement is
Select one:
a. $60,800.
b. $67,200.
c. $65,280.
d. $64,000.

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3.9 Ratings (492 Votes)

Correct answer----$60,800

Bonds are issued at Premium. The amount of interest expense will be cash paid for interest minus premium to be amortized in the year using Straight line method.

Period	Cash payment (Credit)	Interest Expense (Debit)	Discount on bond	Premium on bond balance	Bonds payable Carrying Value
At issue				$ 16,000	$ 8,16,000
Year 2017 end	$ 64,000	$ 60,800	$ 3,200	$ 12,800	$ 8,12,800
Year 2018 end	$ 64,000	$ 60,800	$ 3,200	$ 9,600	$ 8,09,600
Year 2019 end	$ 64,000	$ 60,800	$ 3,200	$ 6,400	$ 8,06,400
Year 2020 end	$ 64,000	$ 60,800	$ 3,200	$ 3,200	$ 8,03,200
Year 2021 end	$ 64,000	$ 60,800	$ 3,200	$ -	$ 8,00,000

Year 2017 interest expense = $64000-3200=$60800

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