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10 March, 03:40

On January 1, the Kings Corporation issued 10% bonds with a face value of $96,000. The bonds are sold for $94,080. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Kings records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31 of the first year is.

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  1. 10 March, 03:57
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    9,792 total interest expense

    Explanation:

    face value 96,000

    issued at 94,080

    discount 1,920

    amortization of the bond:

    discount/total payment

    10 years atsemiannual payment = 20 payment

    1,920/20 = 96

    cash proceed:

    96,000x 10%/2 = 4,800

    discount 96

    interest expense 4,896 per payment

    2 payment per year 9,792 total interest expense
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