Mcdonaugh Corporation issued $250,000 of 5%, 10-year bonds payable onJanuary 1, 2019. The market interest rate when the bonds were issued was 8%. Interest is paidsemiannually on January 1 and July 1. The first interest payment is July 1, 2019. Using theeffective-interest amortization method, how much interest expense will Mcdonaugh record onJuly 1, 2019? Use Excel to calculate the issue price.a. $4,976b. $7,961c. $1,711d. $10,000e. $6,250

Question

Mcdonaugh Corporation issued $250,000 of 5%, 10-year bonds payable on
January 1, 2019. The market interest rate when the bonds were issued was 8%. Interest is paid
semiannually on January 1 and July 1. The first interest payment is July 1, 2019. Using the
effective-interest amortization method, how much interest expense will Mcdonaugh record on
July 1, 2019? Use Excel to calculate the issue price.
a. $4,976
b. $7,961
c. $1,711
d. $10,000
e. $6,250

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Bond/Notes Valuation

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