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Adelphi company purchased a bond investment on January 1, 2021. The bonds have a par of $50,000, pay interest at a 3% annual rate and have 10 years until maturity. What is the total Interest Income that will be reported over the life of the bond investment if the bonds were purchased at 104 and Adelphi uses the straight line amortization method

Respuesta :

Tundexi

Answer:

$13,000

Explanation:

Total Interest received over 10 year period = $50,000 * 3% * 10

Total Interest received over 10 year period = $15,000

Purchase price of bonds = $50,000 * 104%

Purchase price of bonds = $52,000

Total amount to be amortized over life of bonds = $52,000 - $50,000

Total amount to be amortized over life of bonds = $2,000

Total Interest Income that will be reported = $15,000 - $2,000 = $13,000. So, the total Interest Income that will be reported over the life of the bond investment if the bonds were purchased at 104 is $13,000.

                                      Adelphi Company

The total Interest Income that will be reported over the life of the bond    investment is :

  • Total Interest received over 10 year period = $50,000 * 3% * 10

Total Interest received over 10 year period = $15,000

  • Purchase price of bonds = $50,000 * 104%

Purchase price of bonds = $52,000

  • Total amount to be amortized over life of bonds = $52,000 - $50,000

Total amount to be amortized over life of bonds = $2,000

  • Total Interest Income that will be reported = $15,000 - $2,000

Total Interest Income that will be reported= $13,000.

Therefore , the bond investment if the bonds were purchased at 104 is $13,000.

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