A company issued $100,000 5-year,7% bonds and received $101,137 in cash.The market rate of interest when the bonds were issued was 6.5%.What is the amount of interest expense to be recorded for the first annual interest period if the company uses the effective-interest method of amortization?
A)$6,573.91
B)$7,000.00
C)$6,500.00
D)$7,079.59

Question

Quizplus · Accepted Answer

The interest expense is calculated using the market rate of 6.5% on the carrying amount of the bonds, which is $101,137. Therefore, $101,137 * 6.5% = $6,573.91.

A Company Issued $100,000 5-Year,7% Bonds and Received $101,137 in Cash.The