Answer:
<h2>Arch Services</h2>
Interest Expense as at December 31:
Explanation:
a) Computation of Interest Expense:
Interest per annum = $331,000 x 14% = $46,340
Interest per month = $3,861.66667 ($46,340/12)
Interest for two months = $7,723 ($46,340/12) x 2
b) Interest on bonds is usually paid monthly, quarterly, semi-annually, or yearly. In this example, the interest is payable every six months, on April 30 and October 31. However, as the year ends on December 31, there is need to accrue interest expense for the period, in line with the accrual concept and matching principle of generally accepted accounting principles. These require that expenses are accrued for the period for which they are incurred and matched to the revenue that they produced whether payment was made or not for them.
