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29 May, 20:22

On November 1, 2019, Davis Company issued $30,000, ten-year, 7% bonds for $29,100. The bonds were dated November 1, 2019, and interest is payable each November 1 and May 1. Davis uses the straight-line method of amortization.

How much is the semi-annual interest expense when the straight-line method of amortization is utilized?

A. $1,095.

B. $2,055.

C. $2,190.

D. $2,010.

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Answers (1)
  1. 29 May, 23:45
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    Answer: A.) $1,095

    Explanation:

    Bond value = $30,000

    Rate = 7%

    Period = 10 years

    Issue price = $29,100

    Bond value * rate:

    30,000 * 0.07 = $2100

    Semi annually:

    $2100 / 2 = $1050

    (Bond value - issue price) : (period * 2)

    ($30,000 - $29,100) / (10 * 2)

    $900 : 20 = $45

    $1050 + $45 = $1,095
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