Math Problem Statement
Sandhill Corporation issued $340,000 of 5-year bonds on April 1, 2023. Interest is paid semi-annually on April 1 and October 1. Below is a partial amortization schedule for the first few years of the bond issue.
Semi-Annuall
Interest Period
Interest
Payment
Interest
Expense
Amortization
Carrying
Amount of Bonds
Apr.1, 2023
$355,678
Oct. 1, 2023
$6,800
$5,335
$1,465
354,213
Apr. 1, 2024
6,800
5,313
1,487
352,726
Oct. 1, 2024
6,800
5,291
1,509
351,217
Apr. 1, 2025
6.800
5,268
1,532
349,685
Oct. 1, 2025
6,800
5,245
1,555
348,130
Apr. 1, 2026
6,800
5,222
1,578
346,552 Total interest expense? 31674 is not the answer okay
Solution
To calculate the total interest expense for the given bond amortization schedule, you need to sum up all the "Interest Expense" amounts listed in each period.
Here are the steps:
- Interest Expense for October 1, 2023 = $5,335
- Interest Expense for April 1, 2024 = $5,313
- Interest Expense for October 1, 2024 = $5,291
- Interest Expense for April 1, 2025 = $5,268
- Interest Expense for October 1, 2025 = $5,245
- Interest Expense for April 1, 2026 = $5,222
Now, summing up these values:
However, since you mentioned that 31,674 is not the correct answer, it seems we need to investigate further. This could indicate that part of the question is missing or misunderstood, or perhaps some interest amounts are omitted. You may want to confirm the periods or consider any other interest components over the remaining bond periods.
Would you like to go through further details or check the complete amortization? Here are 5 potential questions:
- Do we have the complete bond amortization schedule for all periods?
- Was the bond issued at a premium or discount, affecting the amortization method?
- Should we include additional adjustments for any missing interest payments?
- What was the method used to calculate the interest expense—effective interest method or straight-line method?
- Are there any other costs or bond-related fees not covered in this partial schedule?
Tip: When calculating bond interest expense using amortization, ensure the amortization schedule matches the method used (effective vs. straight-line) and covers the entire bond period.
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Math Problem Analysis
Mathematical Concepts
Finance
Bond Amortization
Interest Expense Calculation
Formulas
Interest Expense = Carrying Amount of Bonds * Market Interest Rate
Amortization = Interest Payment - Interest Expense
Theorems
Effective Interest Method
Suitable Grade Level
College Level (Finance/Accounting)
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