Lake Company received proceeds of $188,000 on 10-year, 6% bonds issued on January 1, 2021.The bonds had a face value of $200,000, pay interest annually on January 1, and have a call price of 101.What is the amount of interest Lake must pay the bondholders on January 1, 2022?

Question

Quizplus · Accepted Answer

The annual interest payment on the bonds is calculated as: 
$200,000 x 6% = $12,000

Since Lake issued the bonds on January 1, 2021, the bondholders would receive interest on January 1, 2022. Therefore, Lake must pay $12,000 in interest to the bondholders on January 1, 2022.

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