A company issued $100,000 5-year,7% bonds and received $101,137 in cash.The market rate of interest when the bonds were issued was 6.5%.What is the amount of interest expense to be recorded for the first annual interest period if the company uses simplified effective-interest amortization?
A) $6,573.91
B) $7,000.00
C) $6,500.00
D) $7,079.59

Question

Quizplus · Accepted Answer

The interest expense is calculated using the market rate of 6.5% on the carrying amount of $101,137, which results in $6,573.91 for the first year.

A Company Issued $100,000 5-Year,7% Bonds and Received $101,137 in Cash.The