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:

Pesos

The currency unit of several countries in Latin America and the Philippines.

Bolivars

The currency of Venezuela, used as a medium of exchange within the country.