Levi Company issued $200,000 of 12% bonds on January 1 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1 and mature in five years on January 1. The total interest expense related to these bonds for the current year ending on December 31 is
A) $2,000
B) $6,000
C) $18,000
D) $24,000

Question

Quizplus · Accepted Answer

The annual interest expense is 12% of $200,000, which is $24,000. Since the bonds pay interest semiannually, the total interest expense for the year is $24,000.

Levi Company Issued $200,000 of 12% Bonds on January 1