A company issued 10-year,7% bonds with a par value of $100,000.The company received $96,526 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

A) $3,326.00.
B) $3,500.00.
C) $3,673.70.
D) $7,000.00.
E) $7,347.40.

Question

nimisha solanki · Accepted Answer

Final Answer : C, Explanation :  The bonds were issued at a discount of $3,474 ($100,000 - $96,526).The annual interest expense is $7,000 ($100,000 x 7%).Using the straight-line method, the semiannual interest expense is ($7,000/2) = $3,500.To account for the discount, the semiannual interest expense is increased by ($3,474/20) = $173.70.Therefore, the total semiannual interest expense is $3,673.70 (option C).

A company issued 10-year,7% bonds with a par value of $100,000.The company received $96,526 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

A) $3,326.00.
B) $3,500.00.
C) $3,673.70.
D) $7,000.00.
E) $7,347.40.

Definitions

Learning Objectives

Learning Objectives

Related questions

A company issued 10-year,7% bonds with a par value of $100,000.The company received $96,526 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:A) $3,326.00.B) $3,500.00.C) $3,673.70.D) $7,000.00.E) $7,347.40.

Definitions

Learning Objectives

Learning Objectives

Related questions

A company issued 10-year,7% bonds with a par value of $100,000.The company received $96,526 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

A) $3,326.00.
B) $3,500.00.
C) $3,673.70.
D) $7,000.00.
E) $7,347.40.