Table 15-3
Redding Corporation issued $400,000 of 10%, five-year bonds. The bonds are dated and sold on February 1, 2017. Interest payment dates are February 1 and August 1. The market interest rate is 8% and the bonds are sold for $432,442. The company uses the effective-interest method of amortization.
-Refer to Table 15-4.Assuming the bonds are issued at 104 plus accrued interest on July 1,2017,the semiannual cash payment for interest on November 1,2017 will be:

Question

Quizplus · Accepted Answer

The semiannual cash payment for interest on November 1, 2017 will be $96,000. This is because the bonds were issued at 104 plus accrued interest on July 1, 2017. The accrued interest is $4,000 ($400,000 x 8% x 5/12). The semiannual interest payment is $20,000 ($400,000 x 10% x 1/2). The total cash payment for interest on November 1, 2017 is $24,000 ($20,000 + $4,000).

Table 15-3 Redding Corporation Issued $400,000 of 10%, Five-Year Bonds. the Bonds