On January 1, 2017, Citywide Sales issued $25,000 in bonds for $29,800
These are eight-year bonds with a stated rate of 15% and pay semiannual interest. Citywide Sales uses the straight-line method to amortize the bond premium. On June 30, 2017, when Citywide makes the first payment to bondholders, what is the amount that will be reported as Interest Expense?
A) $1,575
B) $1,875
C) $3,225
D) $1,225
A .Cash Interest Payment ($25,000 x 15% x 6/12 ) $1,875
Less: Amortization of Premium [(($29,800 - $25,000 ) / 8 ) x (6/12 )] 300
Total Interest Expense $1,575
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