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On July 1, 20X1 Klein Company issued $200,000 face amount bonds for $195,000. The effective interest rate is 8%. The bonds pay semi annual interest of 7% on Jan 1 and July 1. On Dec 31, 20X1, the company should credit ________

Respuesta :

Answer:

Bond discount of $800

Explanation:

The computation of the credit amount of bond discount is shown below

= (Amount × effective interest rate) - (Face amount × interest rate)

= ($195,000 × 4%) - ($200,000 × 3.5%)

= $7,800 - $7,000

= $800

Since it is on semi annual interest rate so the interest rate by  2

Hence, the company should credit the bond discount for $800