Given the following information from an amortization table, compute the interest expense, discount amortization, and the carrying value for the next line of the table, rounding your answer to the nearest dollar:: $$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
6 \% \text { Cash } \
\text { Interest }
\end{array} & \begin{array} { c }
7 \% \text { Effective } \
\text { Interest }
\end{array} & \begin{array} { c }
\text { Discount } \
\text { Amortization }
\end{array} & \begin{array} { c }
\text { Carrying } \
\text { Value }
\end{array} \
\hline \$ 42,000 & \$ 47,340 & \$ 5340 & \$ 681,630 \
\hline
\end{array}$$
A) Interest Expense $47,340; Discount Amortization $5,340; Carrying Value $676,290
B) Interest Expense $47,714; Discount Amortization $5,714; Carrying Value $687,344
C) Interest Expense $47,714; Discount Amortization $5,340; Carrying Value $676,290
D) Interest Expense $47,340; Discount Amortization $5,340; Carrying Value $681,630

Question

Given the following information from an amortization table, compute the interest expense, discount amortization, and the carrying value for the next line of the table, rounding your answer to the nearest dollar:: $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
6 \% \text { Cash } \
\text { Interest }
\end{array} & \begin{array} { c } 
7 \% \text { Effective } \
\text { Interest }
\end{array} & \begin{array} { c } 
\text { Discount } \
\text { Amortization }
\end{array} & \begin{array} { c } 
\text { Carrying } \
\text { Value }
\end{array} \
\hline \$ 42,000 & \$ 47,340 & \$ 5340 & \$ 681,630 \
\hline
\end{array}$$
A) Interest Expense $47,340; Discount Amortization $5,340; Carrying Value $676,290
B) Interest Expense $47,714; Discount Amortization $5,714; Carrying Value $687,344
C) Interest Expense $47,714; Discount Amortization $5,340; Carrying Value $676,290
D) Interest Expense $47,340; Discount Amortization $5,340; Carrying Value $681,630

Quizplus · Accepted Answer

The interest expense is calculated by multiplying the carrying value by the effective interest rate: $681,630 * 7% = $47,714. The discount amortization is the difference between the interest expense and the cash interest: $47,714 - $42,000 = $5,714. The new carrying value is the old carrying value plus the discount amortization: $681,630 + $5,714 = $687,344.

Given the Following Information from an Amortization Table, Compute the Interest