Allan Corporation issued 300,8%,10-year,$1,000 bonds on July 1.The annual bond interest date is June 30,and the bonds were issued at face value.The amount of interest expense reported for the current year is:

Question

Quizplus · Accepted Answer

The amount of interest expense for the current year can be calculated as follows:
= Face value of the bond x Coupon rate
= $1,000 x 8%
= $80 per bond
There are 300 bonds issued, so the total interest expense for the year is:
= $80 x 300
= $24,000
However, the bonds were issued on July 1, so only 6 months of interest needs to be recorded for the current year:
= $24,000 / 2
= $12,000
Therefore, the correct answer is C, $12,000.

Allan Corporation Issued 300,8%,10-Year,$1,000 Bonds on July 1