On January 1, 2015, Finch Company Issued $72,000 of 5-Year

question 27

Multiple Choice

On January 1, 2015, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was 12%, so the bonds were discounted and sold for $61,401. Finch uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. How much Interest Expense will be recorded when the first interest payment is made?

• A)$2,778
• B)$3,684
• C)$2,880
• D)$4,320

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Definitions:

Total Deductions

The sum of all amounts subtracted from an individual's gross income for taxes, benefits, and other expenses.

Net Earnings

The amount of income left after deducting taxes, benefits, and other expenses from gross earnings; often referred to as take-home pay.

Financial Support

Monetary assistance provided to an individual or organization to help cover expenses.

Employee

An individual who works for another person or business in exchange for compensation.