Question

On January 1, a company issued and sold a $500,000, 5%, 10-year bond payable, and received proceeds of $496,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is: Multiple Choice $500,000. $499,800. $500,200 $495,800 $496,200

Answer 1

The carrying value of the bonds immediately after the first interest payment is  $496,200.

What is Interest?

The fee you pay to borrow money or the fee you charge to lend money is called interest. The most common way to represent interest is as a yearly percentage of the loan amount. The interest rate on the loan is known as this percentage.

Simple (regular) interest, accumulated interest, and compound interest are the three different kinds of interest.

Consider borrowing $1,000 at a 10% interest rate for seven years. Your interest for the first year would be $100. Your interest payment for the following year would be made up of the principal amount plus interest, or $1,100. As a result, your interest for the following year would be $110 ($1,100 multiplied by 0.10).

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