Question

Moonlight Company sells $ 300 comma 000 of 9​%, 15​-year bonds for 67.0453 on April​ 1, 2018. The market rate of interest on that day is 14.5​%. Interest is paid each year on April 1. The issue price of the bond is $ 201 comma 136. Moonlight Company uses the​ straight-line amortization method. The amount of interest expense for each year will be

Answer 1

Answer:

Interest expense for the year: 33,590.33

Explanation:

face value $ 300,000

rate 9%

time 15 years

issued at   $  201, 136

discount:  $    98, 864

amortization per year under straight-line: the discount is equally distributed for each period

98,864 / 15 = 6,590.33

interest expense per year:

face value x rate + amortization:

300,000 x 0.09 + 6,590.33 = 33,590.33