On April 1, the ZachMore Corporation issues $500,000 of 10 year, 7% bonds dated April 1 when the market rate of interest is 8% at $466,024.21. ZachMore Corporation uses the effective- interest method of amortization. Interest is paid each March 31, and September 30. The interest expense at the December 31 year end is:

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The interest expense is calculated using the effective interest rate method. The bond's carrying amount is $466,024.21, and the market rate is 8%. For the period from October 1 to December 31 (3 months), the interest expense is $466,024.21 * (8%/2) = $27,984.27.

On April 1, the ZachMore Corporation Issues $500,000 of 10