On December 31, 2013, a company issues bonds with a par value of $600,000. The bonds mature in 10 years, and pay 6% annual interest, payable each June 30 and December 31. The bonds sold at $592,000. The company uses the straight-line method of amortizing bond discounts. The company's year-end is December 31. What is total bond interest expense over the 10 year life of the bond?

Bethany Link delivers parts for several local auto parts stores. She charges clients $1.65 per mile driven. She has determined that if she drives 2,400 miles in a month, her average operating cost is $.45 per mile. If Bethany drives 2,800 miles in a month, her average operating cost is $.40 per mile.


Required:
1.
Using the high-low method, determine Bethany’s variable and fixed operating cost components. (Round your cost per unit answer to 2 decimal places.)

variable cost per unit
fixed cost

To find the total bond interest expense over the 10-year life of the bond, we need to calculate the interest expense for each period and then sum them up.

First, let's calculate the annual interest payment. The bond has a par value of $600,000 and pays 6% annual interest. Therefore, the annual interest payment would be 6% of $600,000, which is $36,000.

Next, let's calculate the bond discount. The bonds were sold at $592,000, which is $8,000 less than the par value. This $8,000 difference is considered a bond discount.

To amortize the bond discount using the straight-line method, we need to divide the bond discount ($8,000) by the number of interest payment periods (20, as there are two interest payments per year over a 10-year period). This gives us an annual amortization of $400 ($8,000 divided by 20).

Now, let's calculate the interest expense for each period. Since the interest is payable semi-annually, each interest payment will be half of the annual interest payment we calculated earlier, which is $18,000 ($36,000 divided by 2).

To calculate the interest expense for each period, we subtract the amortization amount ($400) from the interest payment amount ($18,000), which gives us $17,600 in interest expense per period.

Finally, to find the total bond interest expense over the 10-year life of the bond, we multiply the interest expense per period ($17,600) by the number of interest payment periods (20). Thus, the total bond interest expense over the 10-year life of the bond is $352,000 ($17,600 multiplied by 20).