Answer:
option a) $10,840
Explanation:
Data provided in the question:
Value of bond = $100,000
Bonds issued = $95,800
Interest = 10%
Time period = 5 years
Now,
yearly amortization of the bond discount = [tex]\frac{\textup{Value of bond - Bonds issued}}{\textup{Time period}}[/tex]
or
= [tex]\frac{\textup{100,000 - 95,800}}{\textup{5}}[/tex]
or
= $840
Cash payment of interest = $100,000 × 10%
= $10,000
Hence,
the amount of bond interest expense to be recognized in December 31, 2007's adjusting entry = $840 + $10,000
= $10,840
Hence,
The correct answer is option a) $10,840
