Asked by Emily Esparza on May 04, 2024
Verified
Shakey Company issued $500000 of 6% 5-year bonds at 98 with interest paid annually. Assuming straight-line amortization what is the total interest cost of the bonds?
A) $150000
B) $160000
C) $145000
D) $140000
Straight-Line Amortization
A method of evenly distributing the cost of an intangible asset over its useful life.
Total Interest Cost
The sum of all interest payments over the life of a loan, reflecting the true cost of borrowing.
Interest Paid
The amount paid by a borrower to a lender for the privilege of using borrowed money, typically expressed as an annual percentage of the loan outstanding.
- Evaluate the interest expense for bonds via both the effective-interest and straight-line strategies.
- Familiarize yourself with the process of using the straight-line method to amortize bond discounts and premiums.
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Learning Objectives
- Evaluate the interest expense for bonds via both the effective-interest and straight-line strategies.
- Familiarize yourself with the process of using the straight-line method to amortize bond discounts and premiums.
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