A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:
A)$3,289.50.
B)$3,500.00.
C)$3,613,70.
D)$6,633.70.
E)$7,000.00.

Question

Quizplus · Accepted Answer

The correct answer is A because the amount of recorded interest expense for the first semiannual interest period is $3,289.50. This is calculated by taking the face amount of the bonds ($100,000) and multiplying it by the annual interest rate (7%) and then dividing by 2 (since the interest is paid semiannually). This gives us $3,500. We then subtract the amount of premium amortization for the period, which is $210.50. This gives us a total interest expense of $3,289.50.

A Company Issued 5-Year,7% Bonds with a Par Value of $100,000.The