On January 1, a company issued 3%, 20year bonds with a face amount of $90 million for $58,795,340 to yield 6%. Interest is paid semiannually. What was the straightline interest expense on the December 31 annual income statement?

On January 1, a company issued 3%, 20year

bonds with a face amount of $90 million for $58,795,340 to

yield 6%. Interest is paid semiannually.

What was the straightline

interest expense on the December 31 annual income statement?

 (Enter your

answer in dollars not in millions. Round "PV Factor" to 5 decimal places and final answer to the

nearest dollar amount. Omit the "$" sign in your response.)

Interest expense for the year $ 4,260,234 ± 0.01%

Explanation:

Interest will be a plug figure:

$90,000,000 – 58,795,340 = $31,204,660 discount

$31,204,660 / 40 semiannual periods = $780,116 reduction each period

Date General Journal Debit Credit

June 30 Interest expense (to balance) 2,130,117

Discount on bonds payable (difference) 780,117

Cash (1.50% × $90,000,000) 1,350,000

Date General Journal Debit Credit

Dec. 31 Interest expense (to balance) 2,130,117

Discount on bonds payable (difference) 780,117

Cash (1.50% × $90,000,000) 1,350,000

Interest expense for the year: $2,130,117 + 2,130,117 = $4,260,234