Multiple Choice Question 204 Crane Company issued 504000 of

Multiple Choice Question 204

Crane Company issued $504000 of 8%, 5-year bonds at 99, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Solution

B. $206,640

Total interest cost = ($504,000 * .08 * 5) + [$504,000 * (1.00 - .99)]

Total interest cost = $201,600 + $5,040

Total interest cost = $206,640