On january 1, 2017, finch company issued $89,000 of five-year, 8% bonds when the market interest rate was 12%. the issue pri

Question

3 years ago

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On january 1, 2017, finch company issued $89,000 of five-year, 8% bonds when the market interest rate was 12%. the issue pri

ce of the bonds was $73,000. finch uses the effective-interest method of amortization for bond discount. semiannual interest payments are made on june 30 and december 31 of each year. how much interest expense will be recorded when the first interest payment is made? (round your answer to the nearest dollar number.)

Business

1 answer:

Amanda [17] · Answer 1 · 2022-06-09T18:34:32+03:00

Answer:

$4,380

Explanation:

The computation of the interest expense recorded in the first year is shown below:

= Issued price of the bond × market interest rate ÷ semi annual period

= $73,000 × 12% ÷ 2

= $73,000 × 6%

= $4,380

Hence, the interest expense would be recorded when the interest payment is made is $4,380

We simply applied the above formula

On january​ 1, 2017, finch company issued​ $89,000 of​ five-year, 8% bonds when the market interest rate was​ 12%. the issue pri

On january 1, 2017, finch company issued $89,000 of five-year, 8% bonds when the market interest rate was 12%. the issue pri