On January 1,Melrose Manufacturing issues a 5-year bond with a face value of $15,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $16,299.Using the effective-interest method of amortization and rounding to the nearest dollar,the interest expense for the first year ended December 31 would be:
A)$750.
B)$814.95.
C)$1,050.
D)$1,140.93.

Question

Quizplus · Accepted Answer

Interest expense = Carrying value of bonds × Market interest rate
= $16,299 × 0.05 = $814.95

On January 1,Melrose Manufacturing Issues a 5-Year Bond with a Face