Final answer:
The correct statement regarding the Neville Company's bond issue is that interest payments to bondholders each period will be $6,000, which is 6% of the $100,000 face value of the bonds issued. The response about the amortization of the premium or the specific amount, like $1,226 or $613, cannot be confirmed without further calculations.
Step-by-step explanation:
The question regarding Neville Company's bond issue involves using the effective interest method of amortization. Given that the bond was issued at a premium (since the issue price was $107,732 which is more than the face value of $100,000) and the coupon rate (6%) is higher than the market interest rate (5%), the bond will amortize the premium over its life. The interest payments, however, will be based on the face value of the bond and the stated coupon rate. Therefore, for each period, Neville Company will pay interest payments of $6,000 (6% of $100,000), which is the correct answer to part 'c.' The amortization of the premium requires a calculation involving the market interest rate and the coupon rate, which is not provided in this question.
To answer the student's specific question, for the Neville Company's bond issue, the correct statement is that 'c. Interest payments to bondholders each period will be $5,000' is false because the interest payment should be 6% of $100,000 which is $6,000, not $5,000. The correct statement regarding the interest payments would be 6% of $100,000 annually which is $6,000.