Sparks Company Received Proceeds of $423,000 on 10-Year, 8% Bonds

question 161

Multiple Choice

Sparks Company received proceeds of $423,000 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $400,000, pay interest annually on December 31st, and have a call price of 102. Sparks uses the straight-line method of amortization. What is the amount of interest Sparks must pay the bondholders in 2013?

• A) $33,840
• B) $32,000
• C) $32,640
• D) $3,384

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Definitions:

Price Discriminate

A strategy where a seller charges different prices for the same product or service to different customers, based on factors like willingness to pay, location, or purchase volume.

Economic Profit

The financial measurement between a company's aggregate earnings and its total costs, covering both explicit and hidden charges.

Output Level

The quantity of goods or services produced by a firm or economy in a certain period.

Nondiscriminating

A principle or practice that ensures equal treatment and opportunities for all, without biases or prejudices based on irrelevant characteristics.