Sparks Company received proceeds of $423,000 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $400,000, pay interest annually on December 31st, and have a call price of 102. Sparks uses the straight-line method of amortization. What is the amount of interest Sparks must pay the bondholders in 2013?
A) $33,840
B) $32,000
C) $32,640
D) $3,384

Question

Quizplus · Accepted Answer

The interest payment is calculated based on the face value of the bonds. The annual interest payment is 8% of $400,000, which equals $32,000.

Sparks Company Received Proceeds of $423,000 on 10-Year, 8% Bonds