Manu Corporation issued $200,000 of 4%, 5-year bonds for proceeds of $192,330. The market interest rate is 6%. Interest is paid semi-annually. How much bond interest expense is recorded on the first interest date?

Question

Quizplus · Accepted Answer

The bond interest expense is calculated using the market interest rate of 6% on the carrying amount of the bonds. The semi-annual interest expense is $192,330 * (6% / 2) = $5,770.

Manu Corporation Issued $200,000 of 4%, 5-Year Bonds for Proceeds