Nest corporation issued 5-year, 5% bonds having a par value of $100,000

Accounting Mar 16, 2021

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

Expert Solution

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

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