On January 1, 2015, Y. Knott Inc. issued $100,000 in bonds payable with an interest coupon...

Transcribed Image Text:

On January 1, 2015, Y. Knott Inc. issued $100,000 in bonds payable with an interest coupon of 10%. Since the market rate of interest was close to 12%, Y. Knott had to issue the bonds at 94 (that is, the cash received was 94% of face amount). The bonds pay annual interest on January 1st of each year starting 1/1/2016 and principle is due in full on 1/1/2018. The company uses the straight-line method to amortize bond discounts and premiums. What dollar mount of Interest Expense did Y. Knott Inc. show on the Income Statement in 2015 related to the bonds? On January 1, 2015, Y. Knott Inc. issued $100,000 in bonds payable with an interest coupon of 10%. Since the market rate of interest was close to 12%, Y. Knott had to issue the bonds at 94 (that is, the cash received was 94% of face amount). The bonds pay annual interest on January 1st of each year starting 1/1/2016 and principle is due in full on 1/1/2018. The company uses the straight-line method to amortize bond discounts and premiums. What dollar mount of Interest Expense did Y. Knott Inc. show on the Income Statement in 2015 related to the bonds?

Answer rating: 100% (QA)

To calculate the dollar amount of interest expense related to the bonds in 2015 we need to determine ... View the full answer