The annual interest expense on a $50,000,15-year,10 percent bond issued for $45,650 plus accrued interest 6 months after authorization,assuming straight-line amortization,would be

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The annual interest expense for a bond is calculated by adding the annual coupon payment to the annual amortization of the bond discount or premium. Here, the annual coupon payment is 10% of $50,000, which equals $5,000. The bond was issued at a discount ($45,650 instead of $50,000), so we need to amortize this discount over the life of the bond. The discount is $4,350 ($50,000 - $45,650). Over 15 years, this gives an annual amortization of $290 ($4,350 / 15). Therefore, the total annual interest expense is $5,000 (coupon payment) + $290 (amortization of discount) = $5,290. Since the options do not include $5,290, the closest and correct option given the choices is $5,300 (A).

The Annual Interest Expense on a $50,000,15-Year,10 Percent Bond Issued