how to calculate interest revenue from held-to-maturity bonds
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Question
On January 3, 2012, Moss Co. acquires $400,000 of Adam Company’s 10-year, 10% bonds at a price of $425,672 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity.Assuming that Moss Co. uses the effectiveinterest method, what is the amount of interest revenue that would be recognized in 2012related to these bonds?
a. $40,000
b. $42,568
c. $38,310
d. $38,160
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