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On April 1,year 1,Cricket Corporation issues $60 million of 12%,10-year bonds payable at par.Interest on the bonds is payable semiannually each April 1 and October 1.
-The amount of cash paid to bondholders for interest during Year 1,is:
A)$6,600,000.
B)$5,400,000.
C)$3,600,000.
D)$1,800,000.

Question

Quizplus · Accepted Answer

The annual interest on the bonds is 12% of $60 million, which equals $7.2 million. Since interest is paid semiannually, bondholders receive half of the annual interest every six months. Therefore, in Year 1, they are paid $7.2 million / 2 = $3.6 million.

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