A company issued 7-year,8% bonds with a par value of $200,000.The market rate when the bonds were issued was 5.5%.The company received $203,010 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:
A)$8,000
B)$8,215
C)$7,785
D)$16,000
E)$4,990

Question

Quizplus · Accepted Answer

Cash interest paid: $200,000 x .08 x .5 = $8,000
Amortization of Bond Premium: $3,010/14 = $215
Interest Expense: $8,000 - $215 = $7,785

A Company Issued 7-Year,8% Bonds with a Par Value of $200,000.The