Lake Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2015. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Lake uses the straight-line method of amortization. What is the amount of interest Lake must pay the bondholders in 2015?

Question

Quizplus · Accepted Answer

The interest payment is calculated as the face value of the bonds ($200,000) multiplied by the annual interest rate (6%), resulting in $12,000 per year. Since the interest is paid semi-annually, the total interest paid in 2015 is $12,000.

Lake Company Received Proceeds of $188,000 on 10-Year, 6% Bonds