Consider the following facts: - On July 1, 2017, Company E purchased Company A\'

Question

Consider the following facts: - On July 1, 2017, Company E purchased Company A's six-year 9% bonds with a face value of $200,000 for $196,000. - The purchased included $6,000 of accrued interest. - The bonds mature on March 1, 2023, and are to be held-to-maturity. - The bonds pay interest semiannually on March 1 and September 1. - Company E uses the straight-line method of amortization. The amount of income Company E should report for the calendar year 2017 as a result of this investment would be $8,823.52. $9,529.40. None of these answers are correct. $8,117.64. $9,882.36.

Explanation / Answer

Purchase Jul 2017. Maturity Mar 2023. Face value                  200,000 Purchase Price                  190,000 Discount                    10,000 Amortization period in months                            68 Amrtization per month                          147 Period Interest dicount Amortization Total cash receipt Sep 2017.                      4,941                                         441                              4,500 Dec 20.17.accrued Interest                      4,941                                         441                              4,500 Total Interest                      9,882 So total Interest income to be recognized in 2017 from this investment is $ 9882 Last option is correct.

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