A Company Issued 5-Year, 7% Bonds with a Par Value

question 114

Multiple Choice

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $101,137 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:

• A) $3,500.00.
• B) $7,000.00.
• C) $3,286.95.
• D) $6,573.90.
• E) $1,750.00.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

User Costs

The costs incurred by the use of a product or service, including wear and tear, opportunity cost of capital, and maintenance.

Extraction Quantity

The amount of natural resources or raw materials removed from the environment for use or sale.

Institutional Intervention

Actions taken by organizations or institutions to address or rectify a particular problem or issue.