On April 1, 2018, Ellucian Corporation invested in the bonds issued by the City of Westminster on January 1, 2018. These 10-year, $700,000 bonds pay interest of 2% with semiannual payments every June 30 and December 31. Ellucian paid par value plus accrued interest. What is the amount of accrued interest paid at the time of purchase?

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The bonds pay 2% annual interest, which is $14,000 per year ($700,000 * 2%). Since interest is paid semiannually, each payment is $7,000. Ellucian purchased the bonds on April 1, 2018, so they owe accrued interest for 3 months (January to March), which is $3,500 ($7,000 * 3/6).

On April 1, 2018, Ellucian Corporation Invested in the Bonds