On January 1, 2019, Ola Company paid $388,900 for a $400,000 face value 3% corporate bond yielding 4%, interest paid annually on

Question

3 years ago

11

On January 1, 2019, Ola Company paid $388,900 for a $400,000 face value 3% corporate bond yielding 4%, interest paid annually on

December 31, and classified it as held-to-maturity. Ola's reporting year ends December 31. On its 2019 income statement, Ola reports interest revenue on the corporate bond of: A. $12,000 B. $15,556 C. $11,667 D. $16,000

Business

1 answer:

shutvik [7] · Answer 1 · 2022-03-19T09:38:37+03:00

Answer:

B. $15,556

Explanation:

As given in the question

Face value of bond = $400,000

Carrying value of bond = $388,900

Discount from par value = $11,100

Coupon rate = 3%

Bond yielding rate = 4%

Interest revenue for the year = Carrying value of bond x Bond yielding rate

Interest revenue for the year = 388,900 x 4%

Interest revenue for the year = $15,556

The correct option is B. $15,556.