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t Naval Supply Company issued five-year, 7% bonds with a face value of $25,000 on January 1, 2019. The effective rate of interest is 6%. Patriot sold the bonds for $26,053. The bonds pay annual interest each December 31. Patriot uses the effective interest method for amortization of premium or discount on bonds payable. (Round answers to nearest whole dollar.) 19. What is the annual amount of cash that Patriot will pay to bond holders for interest

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Answer:

The annual amount of cash that Patriot will pay to bond holders for interest is $1,750

Explanation:

According to the given data we  have the following:

Face Value=$25,000

Rate of interest =7%

Therefore, in order to calculate the annual amount of cash that Patriot will pay to bond holders for interest, we would have to use the following formula:

Annual cash payment of interest = Face value*Rate of interest

Annual cash payment of interest = $25,000*7%

Annual cash payment of interest =$1,750

The annual amount of cash that Patriot will pay to bond holders for interest is $1,750

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