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Allocate bond interest expense using straight-line method

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Question: On December 31, 2010, a company issues 16%, 10-year bonds with a par value of $100,000. Interest is paid on June 30 and December 31. The bonds are sold to yield a 14% annual market rate at an issue price of $110,592. Using the straight-line method to allocate bond interest expense, the issuer records the second interest payment (on December 31, 2011) with a debit to Premium on Bonds Payable in the amount of

(a) $7,470,

(b) $530,

(c) $8,000, or

(d) $400.

Reference no: EM131534660

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