On November 1, 2014, Archangel Services issued $300,000 of 8-year bonds with a stated rate of 9% at par. The bonds make semiannual payments on April 30 and October 31. At December 31, 2014, Archangel made an adjusting entry to accrue interest at year-end. How much Interest Expense will be recorded at December 31, 2014?

Question

Quizplus · Accepted Answer

The interest expense for two months (November and December) needs to be accrued. The annual interest is $300,000 * 9% = $27,000. For two months, the interest is $27,000 * (2/12) = $4,500.

On November 1, 2014, Archangel Services Issued $300,000 of 8-Year