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 straight-line method, the amount of recorded interest expense for the first semiannual interest period is:
A: $3,386.30.
B: $3,500.00.
C: $3,613,70.
D: $6,633.70.
E: $7,000.00.
A: $3,386.30.
B: $3,500.00.
C: $3,613,70.
D: $6,633.70.
E: $7,000.00.
举一反三
- Investors will be willing to pay more than the par value for bonds when the market rate of interest is higher than the contract rate of interest. ( )
- Amortizing a bond discount: A: Allocates a portion of the total discount to interest expense each interest period. B: Increases the market value of the Bonds Payable. C: Decreases the Bonds Payable account. D: Decreases interest expense each period. E: Increases cash flows from the bond.
- When the expected inflation rate decreases, the demand for bonds _________, the supply of bonds _________, and the interest rate _________.
- The Ashley Corporation purchased $600,000 of 4%, 5-year bonds at 97 on January 1, 2014. Interest is to be paid semiannually on January 1 and July 1. This is a held-to-maturity investment. This company uses the straight-line method to amortize any premiums
- When bonds become more widely traded, and as a consequence the market becomes more liquid, the demand curve for bonds shifts to the _________ and the interest rate _________.