[The Following Information Applies to the Questions Displayed Below

question 100

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 1, Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. Interest is payable in cash on December 31 of each year. Wayne uses the straight-line method to amortize bond discounts and premiums.


-Assuming Wayne issued the bond for 102.5,what is the amount of interest expense that will be reported on the income statement for the year ending December 31,Year 1?

• A)$34,500
• B)$36,000
• C)$37,500
• D)$15,000

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Definitions:

Dividing

The arithmetic operation of distributing a quantity into equal parts or groups.

Current Year CPI

The Consumer Price Index for the current year, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often used as an indication of inflation.

Base Year

A reference year used for comparative analysis, often in calculating economic indicators like indexes.