X2 issued callable bonds on January 1, 2021. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: DateCash PaidInterestExpenseDecrease inCarrying ValueCarryingValue 01/01/2021 124,380 12/31/202115,00014,304696123,684 12/31/202215,00014,224776122,907 12/31/202315,00014,134866122,042 12/31/202415,00014,035965121,076 12/31/202515,00013,9241,076120,000 What is the annual market interest rate on the bonds? Multiple Choice 5.8%. 6.3%. 11.5%. 12.5%.

Annual market interest rate = InterestCarrying value

Answered: X2 issued callable bonds on January 1,…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

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X2 issued callable bonds on January 1, 2021. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity:

Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
01/01/2021				124,380
12/31/2021	15,000	14,304	696	123,684
12/31/2022	15,000	14,224	776	122,907
12/31/2023	15,000	14,134	866	122,042
12/31/2024	15,000	14,035	965	121,076
12/31/2025	15,000	13,924	1,076	120,000

What is the annual market interest rate on the bonds?

Multiple Choice

5.8%.
6.3%.
11.5%.
12.5%.

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