On April 1, 2020, a Company Sold $3,500,000 of Ten

question 16

Multiple Choice

On April 1, 2020, a company sold $3,500,000 of ten year, 6% bonds for $2,222,400. From the proceeds, the company paid $200,000 sales commission. Interest is payable semi-annually on April 1 and October 1. What is the effective rate of interest (round to 2 decimal places) ?

• A)6.25%
• B)6.98%
• C)9.81%
• D)11.46%

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Definitions:

Consolidated Statement

A financial statement that includes all assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries.

Cost Of Goods Sold

Direct costs attributable to the production of goods sold by a company, including material and labor.

Parent's Share

The proportion of equity held in a subsidiary by the parent company, often representing controlling interest.

Goodwill

An intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.