A five-year, $500,000 bond was issued on January 1, 2016. The stated/contract rate of interest was 8%,

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A five-year, $500,000 bond was issued on January 1, 2016. The stated/contract rate of interest was 8%, and the market rate of interest was 10%. The interest is paid semiannually. Which of the following statements is correct?

A. This bond was issued at a discount, and the annual interest expense is $40,000.

B. This bond was issued at a premium, and each semiannual cash payment is $25,000.

C. This bond was issued at a discount, and each semiannual cash payment is $20,000.

D. This bond was issued at a premium, and the annual interest expense is $40,000.

Related Book For answer-question

Survey of Accounting

ISBN: 978-0078110856

3rd Edition

Authors: Thomas P. Edmonds, Frances M. McNair, Philip R. Olds, Bor-Yi

Posted Date: Jan 15, 2021 10:05 PM

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A five-year, $500,000 bond was issued on January 1, 2016. The stated/contract rate of interest was 8%,

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as the market rate is greater than stated ra... View the full answer

Survey of Accounting

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