Question

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 effective interest method, the amount of recorded interest expense for the first semiannual interest period is: multiple choice $1,750.00. $3,318.41. $3,500.00. $6,573.90. $7,000.00.

Answer 1

$102,105-$100,000= $2105

$2105/10 =$210.5

1000*.07*.5= $3500

3500- 210.5 = $3289.5

So in my estimation, it is $3,318.41