On January 1, 2012, Fei Corp. issued a 3-year, 5% coupon, $100,000 face value bo

Question

On January 1, 2012, Fei Corp. issued a 3-year, 5% coupon, $100,000 face value bond. The bond was priced at an effective interest rate of 8%, yielding proceeds of $92,137. This is the first and only bond that Fei has ever issued.

Fei’s Statement of Cash Flows for fiscal year 2012 had the following line items:

What was Fei’s Interest Expense on the bond during fiscal year 2012?

$2,418

$7,371

$7,418

$8,000

$5,000

     2012      2011 Net Income      $11,500      $10,350 Depreciation      $25,478      $23,675 Amortization of Bond Discount      $2,418      $0

Explanation / Answer

=$7,418

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