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

question 85

Multiple Choice

A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

• A) $3,500.00.
• B) $3,673.01.
• C) $3,705.30.
• D) $7,000.00.
• E) $7,346.03.

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Definitions:

ATP

Adenosine triphosphate, a molecule that stores and transfers energy within cells, thereby powering a multitude of cellular processes.

Oxidation

A chemical reaction in which a substance loses electrons, often associated with the gain of oxygen or loss of hydrogen, crucial in energy production and metabolic processes.

Electrons

Subatomic particles with a negative charge that circle around an atom's nucleus.