Applegate Corporation sells $170,000, 9%, 20-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance, is:

A) $7,820.
B) $7,735.
C) $7,650.
D) $15,470.

Question

Sebastian Perez · Accepted Answer

Final Answer : A, Explanation :  Interest expense is calculated as follows:Interest expense = Face value of bonds x Stated interest rate x TimeTime is 6 months / 12 months = 1/2 yearInterest expense = $170,000 x 9% x 1/2 = $7,650

Applegate Corporation sells $170,000, 9%, 20-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance, is:

A) $7,820.
B) $7,735.
C) $7,650.
D) $15,470.

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Applegate Corporation sells $170,000, 9%, 20-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance, is:A) $7,820.B) $7,735.C) $7,650.D) $15,470.

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Learning Objectives

Related questions

Applegate Corporation sells $170,000, 9%, 20-year bonds for 96 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest expense recorded on July 1, six months after issuance, is:

A) $7,820.
B) $7,735.
C) $7,650.
D) $15,470.