A company issued 11%, 5-year bonds with a par value of $70,000. The market rate

Question

A company issued 11%, 5-year bonds with a par value of $70,000. The market rate when the bonds were issued was 10%. The company received $72,702 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

$3,500.00.

$3,850.00.

$7,700.00.

$3,635.10.

$7,270.20.

A company issued 11%, 5-year bonds with a par value of $70,000. The market rate when the bonds were issued was 10%. The company received $72,702 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

Explanation / Answer

Answer is $ 3635.10 calculated as follows

Date OP Bal 10 % / 2 A B C D=B*C E=FV* C Rate F=E-D Closing Bal 30-Jun-15          72,702 5%         3,635                 3,850            215               72,487 31-Dec-15          72,487 5%         3,624                 3,850            226               72,261 30-Jun-16          72,261 5%         3,613                 3,850            237               72,025 31-Dec-16          72,025 5%         3,601                 3,850            249               71,776 30-Jun-17          71,776 5%         3,589                 3,850            261               71,515 31-Dec-17          71,515 5%         3,576                 3,850            274               71,240 30-Jun-18          71,240 5%         3,562                 3,850            288               70,952 31-Dec-18          70,952 5%         3,548                 3,850            302               70,650 30-Jun-19          70,650 5%         3,532                 3,850            318               70,332 31-Dec-19          70,332 5%         3,517                 3,850            333               69,999

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.