Use the following to answer questions
On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.
-Based on the above,how much interest expense will Hanover report on its income statement on December 31,2016?
A)$423
B)$2,115
C)$5,640
D)$6,063

Question

Use the following to answer questions 
On January 1,2016,The Hanover Corporation issued $70,500 of 8%,5-year bonds at 97.Hanover uses the straight-line method of bond discount amortization.The interest payments are due on December 31 each year.
-Based on the above,how much interest expense will Hanover report on its income statement on December 31,2016?
A)$423
B)$2,115
C)$5,640
D)$6,063

Quizplus · Accepted Answer

The bond discount is $70,500 * 3% = $2,115. Over 5 years, the annual amortization is $2,115 / 5 = $423. The annual interest payment is $70,500 * 8% = $5,640. Therefore, the total interest expense is $5,640 + $423 = $6,063.

Use the Following to Answer Questions