On April 1,Braintree Corporation issued 10%,10-year,$600,000 bonds at 106.Interest dates are April 1 and October 1.The amount of cash paid out for interest during the current calendar year is:

Question

Quizplus · Accepted Answer

- The face value of the bonds is $600,000 and they were issued at 106, meaning they were sold for 106% of their face value, or $636,000 ($600,000 x 1.06).
- The annual interest payment is 10% of the face value, or $60,000 ($600,000 x 0.10). This is divided into two semi-annual payments of $30,000 each ($60,000 / 2).
- Since the bonds were issued on April 1, the first interest payment of $30,000 is due on October 1 (6 months after issuance). The company will need to pay $30,000 in cash on that date.
- Therefore, the amount of cash paid out for interest during the current calendar year (assuming no early redemption of the bonds) is $30,000.

On April 1,Braintree Corporation Issued 10%,10-Year,$600,000 Bonds at 106