On January 1,2013,Jacob Issues $600,000 of 11%,15-Year Bonds at a Price

question 98

Multiple Choice

On January 1,2013,Jacob issues $600,000 of 11%,15-year bonds at a price of 102½.The straight-line method is used to amortize any bond premium or discount.What is the total interest expense for the life of these bonds?

• A)$975,000
• B)$964,000
• C)$936,000
• D)$772,000
• E)$990,000

---

Definitions:

Average Costs

The total costs (fixed and variable) divided by the total output production, giving a per unit cost of production.

Fixed Manufacturing Cost

The portion of total manufacturing costs that does not change with the level of production, such as rent, insurance, and salaries of permanent staff.

Production Costs

Expenses associated with manufacturing a product including labor, materials, and overhead.

Activity Levels

The degree of operations or the volume of work performed in a specific period, affecting various costs and operational strategies.