On April 1, Ballentine Corporation issued 10%, 10-year, $800,000 bonds at face value. 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 bonds have a 10% annual interest rate, so the annual interest is $80,000 (10% of $800,000). Since interest is paid semi-annually, $40,000 is paid on April 1 and $40,000 on October 1, totaling $40,000 for the current calendar year.

On April 1, Ballentine Corporation Issued 10%, 10-Year, $800,000 Bonds