MC Qu. 120 A company issued... A company issued 5-year, 6% bonds with a par valu
ID: 2339243 • Letter: M
Question
MC Qu. 120 A company issued...
A company issued 5-year, 6% bonds with a par value of $92,000. The company received $89,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:
Multiple Choice:
$5,520.00.
$5,930.60.
$2,554.70.
$2,965.30.
$2,760.00.
MC Qu. 122 A company issued...
A company issued 11%, 5-year bonds with a par value of $150,000. The market rate when the bonds were issued was 12%. The company received $144,481 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:
Multiple Choice:
$8,250.00.
$8,668.86.
$17,337.72.
$9,000.00.
$16,500.00.
Explanation / Answer
solution:
(a)
A company issued 5years 6% bonds with par value $92000 and received $89947.
The differnce amount is $92000-$89947 =$ 2053
therefore 2053 will be discount.
during the life of bonds the discount amount would be amortized.
therefore anual amortizition = 2053/5 =410.6.3
the amount of interest expense for the first semi anual interest period :
the amount of interest expense for the first semiannual interest period is $2965.
(b)
FV=150000+12% *6% =10080
12%/2
30/6/2015
the amount of interest expense for the first semiannual interest period is $8668
iinterest on bonds(92000*6%*1/2) 2760 discount amortization(410.60/2) 205.3 total interest expense $2965Related Questions
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