Piazzi, Inc. sold $400,000 of its 9%, five-year bonds dated January 1, 2013, on May 1, 2013, for $393,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is used.

1. Refer to Exhibit 14-8. Interest expense after the July 1, 2013, interest payment has been posted is

a.$12,500.

b.$6,250.

c.$12,000.

d. $18,000.

Question

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Business

28 November, 11:22

Piazzi, Inc. sold $400,000 of its 9%, five-year bonds dated January 1, 2013, on May 1, 2013, for $393,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is used.

1. Refer to Exhibit 14-8. Interest expense after the July 1, 2013, interest payment has been posted is

a.$12,500.

b.$6,250.

c.$12,000.

d. $18,000.

+4

Answers (1)

Know the Answer?

Hannah Steele · Answer 1

What is given:

Face value = 400,000

Semiannual Coupon rate = 9%*6/12 = 4.5%

n = 5*2 = 10 periods

Current price = 393,000

Calculations:

Interest payment = 400,000 * 4.5% = 18,000

So the answer is D