Foley Company issued $2,000,000 of 6%, 5-year bonds at 98, which pay interest annually.Assuming straight-line amortization, what is the total interest cost of the bonds?

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The total interest cost includes the annual interest payments plus the discount on the bonds. Annual interest is $2,000,000 * 6% = $120,000. Over 5 years, this totals $600,000. The bonds were issued at 98, so the discount is $2,000,000 * 2% = $40,000. Total interest cost is $600,000 + $40,000 = $640,000.

Foley Company Issued $2,000,000 of 6%, 5-Year Bonds at 98