A company purchased $60,000 of 5% bonds on May 1 at par value.The bonds pay interest on March 1 and September 1.The amount of interest accrued on December 31 (the company's year-end)would be:
A)$1,000.
B)$500.
C)$1,250.
D)$2,500.
E)$1,500.

Question

Quizplus · Accepted Answer

The bonds pay interest on March 1 and September 1. So, the interest accrued on December 31 would be for 4 months (from September 1 to December 31). The annual interest is $60,000 * 5% = $3,000. So, the interest accrued on December 31 would be $3,000 * 4/12 = $1,000.

A Company Purchased $60,000 of 5% Bonds on May 1