On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of...
On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.
True or false
Homework Answers
Answer-------------True.
.
Interest on bonds for 8 years will be $400,000 as calculated below
| Par value of bonds | $ 500,000.00 |
| Interest rate (Semiannual) (10/2) | 5% |
| Semiannual payment | $ 25,000.00 |
| Number of payments (8 years x 2) | 16 |
| Total Interest in 8 years | $ 400,000.00 |
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