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Homework answers / question archive / Nest corporation issued 5-year, 5% bonds having a par value of $100,000
Nest corporation issued 5-year, 5% bonds having a par value of $100,000. The company received proceeds of $95,735. Calculate the company's interest expense for the 1st semi-annual interest period, assuming straight-line method. (Round your intermediate calculations and the final answer to 2 decimal places).
a. $2,500.00
b. $2,926.50
c. $5,853.00
d. $5,000.75
The correct answer is b) 2926.5
Explanation
Amount of interest expense
= interest paid + discount amortized
= (100000x5%/2) + ((100000-95735)/10)
= 2500+426.5
= 2926.5
