On January 1,Melrose Manufacturing Issues a 5-Year Bond with a Face

question 25

Multiple Choice

On January 1,Melrose Manufacturing issues a 5-year bond with a face value of $15,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $16,299.Using the effective-interest method of amortization and rounding to the nearest dollar,the interest expense for the first year ended December 31 would be:

• A)$750.
• B)$814.95.
• C)$1,050.
• D)$1,140.93.

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Definitions:

Trade Discount

A reduction in the list price granted by a supplier to a buyer, often based on the volume of goods purchased or as a promotion.

Freight Costs

Charges incurred for the transportation of goods from one location to another, often considered part of the cost of goods sold.

Credit Memo

A Credit Memo is a document issued by a seller to a buyer, reducing the amount the buyer owes to the seller under specific circumstances, such as returned goods.

Gross Profit

Gross profit is a company's revenue minus its cost of goods sold, representing the profit made before deducting overheads, payroll, taxation, and interest payments.