Question
On January 1 of Year 1, Drum Line Airways issued $3,500,000 of par value bonds for $3,200,000. The bonds pay interest semiannually on January 1
On January 1 of Year 1, Drum Line Airways issued $3,500,000 of par value bonds for $3,200,000. The bonds pay interest semiannually on January 1 and July 1. The contract rate of interest is 7% while the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,000 every six months.
The amount of interest expense recognized by Drum Line Airways on the bond issue in Year 1 would be:
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
6th Edition
003025809X, 978-3540014386
