Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2018. The bonds have a 10-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds.
- What is the interest expense on the bonds in 2019?

Question

Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2018. The bonds have a 10-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. 
- What is the interest expense on the bonds in 2019?

Quizplus · Accepted Answer

Semiannual effective rate = $344,632 / $11,487,747 = 3%
Interest expense = $341,261 + ($11,316,611 × 3%) = $680,759

Prescott Corporation Issued Ten Thousand $1,000 Bonds on January 1