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

Quizplus · Accepted Answer

The bond discount is $100,000 - $96,526 = $3,474.
The annual interest expense is $100,000 x 7% = $7,000.
The semiannual interest expense is $7,000 / 2 = $3,500.
Using the straight-line method, the amount of bond discount amortized each period is $3,474 / 20 = $173.70.
Thus, the interest expense for the first semiannual period is $3,500 + $173.70 = $3,673.70.

A Company Issued 10-Year,7% Bonds with a Par Value of $100,000.The