Maxwell Manufacturing issued $750,000,10-year,10% bonds at 105. What is the total amount of interest expense that will be recorded over the life of these bonds?
A)$750,000
B)$712,500
C)$787,500
D)$825,000

Question

Quizplus · Accepted Answer

Total interest payments = Face value × Stated interest rate × Time
= $750,000 × 0.10 × 10 years = $750,000
Since the bonds were sold at a premium of $37,500,the interest expense to be recorded over the life of the bonds is $712,500 (or total interest payments of $750,000 − premium of $37,500).

Maxwell Manufacturing Issued $750,000,10-Year,10% Bonds at 105