Question

# A company issued five-year, 7% bonds with a par value of \$150,000. The market rate when...

A company issued five-year, 7% bonds with a par value of \$150,000. The market rate when the bonds were issued was 6.5%. The company received \$170,550 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is:

Amount of recorded interest expense for the first semiannual interest period is \$3,195.

 A B C D E Semiannual Interest Period Interest Paid Bond Interest Expense Premium Amortization Unamortized premium Carrying Value at end of period 150,000*7%*6/12 A-C 20,550/10 D-C E-C 0 \$20,550 \$170,550 1 \$5,250 \$3,195 \$2,055 \$18,495 \$168,495 2 \$5,250 \$3,195 \$2,055 \$16,440 \$166,440 3 \$5,250 \$3,195 \$2,055 \$14,385 \$164,385 4 \$5,250 \$3,195 \$2,055 \$12,330 \$162,330 5 \$5,250 \$3,195 \$2,055 \$10,275 \$160,275 6 \$5,250 \$3,195 \$2,055 \$8,220 \$158,220 7 \$5,250 \$3,195 \$2,055 \$6,165 \$156,165 8 \$5,250 \$3,195 \$2,055 \$4,110 \$154,110 9 \$5,250 \$3,195 \$2,055 \$2,055 \$152,055 10 \$5,250 \$3,195 \$2,055 \$0 \$150,000

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