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Homework answers / question archive / On January 1, 2013, Davie Services issued $20,000 of 8% bonds that mature in five years
On January 1, 2013, Davie Services issued $20,000 of 8% bonds that mature in five years. They were sold at a premium for a total of $20,750. The bonds pay annual interest on December 31 of each year. On December 31, 2013, how much is the interest paid to bondholders?
a. $133.33
b. $1,600
c. $1,400
d. $1,660
Answer:
b .
Step-by-Step explanation
The interest on bond is payable on the face value of the bond at a specified rate of interest over the life of the bond.
Interest paid = Face value ?×? interest rate
= $20,000 ?×? 8%
= $1,600
