The Merchant Company issued 10-year bonds on January 1, 2009. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the
effective-interest method to amortize bond discounts and premiums. On July 1, 2009, Merchant should record interest expense (round to the nearest dollar) of
A) $7,032
B) $7,500
C) $8,790
D) $14,065
Answer: A
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