A company issued five-year,7% bonds with a par value of $100,000.The company received $97,947 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:
A)$3,294.70
B)$3,500.00
C)$3,705.30
D)$7,000.00
E)$7,410.60

Question

Quizplus · Accepted Answer

The bond discount is $100,000 - $97,947 = $2,053. Over 10 periods (5 years, semiannual), the discount amortization per period is $205.30. The cash interest payment is $3,500 ($100,000 * 7% / 2). Thus, the interest expense is $3,500 + $205.30 = $3,705.30.

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