Question
On January 1, Company L has 5-year bonds with par value of $1,250,000. Interest is paid every 6 months. Company L uses the effective
On January 1, Company L has 5-year bonds with par value of $1,250,000. Interest is paid every 6 months. Company L uses the effective interest method to amortize bond premiums or discounts. The carrying value of the bonds on January 1 was $1,118,000. On June 30, Company L makes its first interest payment and records the following entry: debiting interest expense for $44,720 and crediting cash for $62,500. What is the annual stated interest rate for the bonds? A. 7.2% B. 10% C. 8% D. 5%
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