A company issued $100,000 of 10% bonds on January 1. The bonds pay interest semiannually on January 1 and July 1. The company has a fiscal year end of May 31. On May 31, the company will:

Question

Quizplus · Accepted Answer

The company's fiscal year end is May 31, which falls within the semiannual interest payment period. Therefore, the company needs to accrue interest expense from January 1 (the issuance date) through May 31. The interest expense for June 1 through June 30 will be paid on the next interest payment date of July 1. Therefore, choice B is the correct option.

A Company Issued $100,000 of 10% Bonds on January 1