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Hunter-Best [27]
3 years ago
12

Art Company issued 6%, 5 year bonds, with par value of $1,600,000, paying semiannual interest for $1,470,226. The annual market

rate of interest on the date of issue was 8%. Assuming effective interest method of amortization, calculate the bond interest expense on the first interest payment date. Select one: A. $117,618 B. $ 58,809 C. $129,774 D. $ 48,000
Business
1 answer:
Soloha48 [4]3 years ago
6 0

Answer:

The correct answer is option (B).

Explanation:

According to the scenario, the given data are as follows:

Bond carrying value = $1,470,226

Rate of interest = 8%

Rate of interest (Semiannual ) = 4%

So, we can calculate the the bond interest expense on the first interest payment by using following formula:

The bond interest expense = Bond carrying value × rate of interest (semiannual)

By putting the value we get

= $1,470,226 × 4%

= $58,809

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3 years ago
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