Tyson Construction Inc.
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.
On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.
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Refer to the information provided for Tyson Construction Inc. The interest expense on the bonds at June 30, 2012 is:

Question

Tyson Construction Inc. 
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.
On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.
-
Refer to the information provided for Tyson Construction Inc. The interest expense on the bonds at June 30, 2012 is:

Quizplus · Accepted Answer

The interest expense is calculated using the market rate of 8% on the carrying amount of the bonds. The carrying amount is $1,135,915, so the interest expense for six months is $1,135,915 * 4% = $45,436.60.