Belpre Co. issued $50,000 of 7-year, zero-coupon notes on January 1 when the market yield was...
Belpre Co. issued $50,000 of 7-year, zero-coupon notes on January 1 when the market yield was 4%. The bond agreement stated that compounding was semiannual. The issue price of the notes was $37,894. How much interest will Belpre Co. report on its income statement during the first year?
- $1,378
- $1,531
- $1,516
- $1,365
Homework Answers
| Interest to be reported during the first year. | ||||||
| First six month interest = $37894*4%*6/12 =$757.88 | ||||||
| For Second Six Month = ($37894+757.88)*4%*6/12 =$773.038 | ||||||
| Total Interest To Be Reported =$757.88+773.038 =$1530.92 | ||||||
| =$1531 | (Rounded Off ) | |||||
| Correct Option : b | ||||||
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