Question

On July 1, 2015, Frank Corp. Purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Frank ends at December 31, 2015, what will be reported with respect to the bonds on that date

Answer 1

Answer:

interest income in amount of $4000 will be accrued

Step-by-step explanation:

given data

principal = $100,000

rate = 8 percent = 0.08  

time period = 6 month ( July - December ) = $\frac{1}{2}$ year

solution

we get here interest at December 31, 2015 that is express as

interest = principal × rate × time ..................1

put here value and we will get

interest =  $100,000 × 0.08 × $\frac{1}{2}$    

interest = $100,000 × 0.08 × 0.5

interest = $4000

so interest income in amount of $4000 will be accrued