On January 1, Year 1, Madness, Inc., issued $1,000,000 of 5%, 10-year bonds when the market rate of interest was 6%. The bonds pay interest annually on December 31. On its income statement for the year ended December 31, Year 1, Madness will show Interest Expense of ________.
a. less than $50,000
b. exactly $50,000
c. The answer cannot be determined without knowing the price of the bond.
d. more than $50,000
Answer: d. more than $50,000
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a. true b. false
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