On January 1, 2013, Davie Services issued $20,000 of 8% bonds that mature in five years

Accounting Mar 19, 2021

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

Expert Solution

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

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