Manu Corporation issued $200,000 of 4% ﬁve-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?
A) $4,000
B) $5,770
C) $6,000
D) $3,847

Question

Quizplus · Accepted Answer

The bond interest expense on the first interest date is calculated using the market interest rate (6% annually or 3% semi-annually) applied to the carrying amount of the bond ($192,330). Thus, the interest expense is $192,330 * 3% = $5,770.

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