On 1 January 2017,Zing Services issued $167,000 of six year debentures with a stated rate of 12%.The market rate at time of issue was 11%,so the debentures were issued with a premium and sold for $191,110.Zing uses the effective-interest method to amortise debentures premium.Half-yearly interest payments are made on 30 June and 31 December of each year.How much Interest expense will be recorded when the first interest payment is made? (Round to the nearest dollar. )
A)$10,020
B)$10,511
C)$11,467
D)$9185

Question

Quizplus · Accepted Answer

The interest expense is calculated using the market rate at issuance. The first interest expense is $191,110 (carrying amount) * 11% (market rate) / 2 = $10,511.

On 1 January 2017,Zing Services Issued $167,000 of Six Year