On April 1,Braintree Corporation issued 10%,10-year,$300,000 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

Since the bonds were issued on April 1 and pay interest semi-annually (April 1 and October 1), two interest payments will be made in the current calendar year. The annual interest is 10% of $300,000, which equals $30,000. Therefore, each semi-annual payment is $30,000 / 2 = $15,000. Two payments in the current year amount to $15,000 * 2 = $30,000. However, the question asks for the amount of cash paid out for interest during the current calendar year, which includes only the payment made after the bonds were issued, thus only one payment of $15,000 is made in the current calendar year.

On April 1,Braintree Corporation Issued 10%,10-Year,$300,000 Bonds at Face Value