RCM Corporation, a calendar-year firm, is authorized to issue $200,000 of 10 percent, 20-year bonds dated January 1, 2011, with interest payable on January 1 and July 1 of each year.
If the bonds were issued on April 1, 2011, the amount of accrued interest on the date of sale is

Question

Quizplus · Accepted Answer

The bonds accrue interest from January 1 to April 1, which is 3 months. The annual interest is $20,000 (10% of $200,000), so for 3 months, the accrued interest is $5,000 ($20,000 * 3/12).

RCM Corporation, a Calendar-Year Firm, Is Authorized to Issue $200,000