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On January 1, 20X1, Perkins issued $100,000 face, 8%, 5-year bonds at $92,278. The bonds pay...

Question:

On January 1, 20X1, Perkins issued $100,000 face, 8%, 5-year bonds at $92,278. The bonds pay interest annually and were priced to yield 10%. Using the effective-interest method, how much is interest expense for 20X1?

a. $9,227.80

b. $9,258.50

c. $8,000

d. $9,544.40

Interest Expenses:

Interest expenses are kinda financial expenses that are related to the fund's loan taken and this will be reported in the debit side of the income statement.

Answer and Explanation:

Calculation of Interest Expenses:

Particulars Formula Calculations Results
Interest expense Face value  Interest rate $100,000  8% $8,000
So the correct answer to this question is option C.


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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