On 1 November 2015, Archangel Services issued $200 000 of 10- year debentures with a stated rate of 3%. The debentures were sold at par, and make half- yearly payments on 30 April and 31 October. At 31 December 2015, Archangel made an adjusting entry to accrue interest at year- end. No further entries were made until 30 April 2016, when the first payment was sent out. At that time, how much interest expense was recorded for the period of January to April 2016?
A)$2 000
B)$6 000
C)$3 000
D)$1 000

Question

Quizplus · Accepted Answer

The interest expense for the period from January to April 2016 is calculated as follows: The annual interest is $200,000 * 3% = $6,000. Since payments are made semi-annually, each payment is $6,000 / 2 = $3,000. However, since the interest for November and December 2015 was already accrued, the interest expense for January to April 2016 is $3,000.

On 1 November 2015, Archangel Services Issued $200 000 of 10-