Question

2. On January 1, 2021, Legion Company sold $250,000 of 8% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $218,844, priced to yield 10%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of: (Round your answer to the nearest dollar amount.)

Answer 1

Answer:

$10,942.20

Explanation:

The computation of the bond interest expense for the six month is shown below:

= Carrying value of the bond × effective interest rate × number of months ÷ total number of months in a year

= $218,844 × 10% × 6 months ÷ 12 months

= $10,942.20

By multiplying the carrying value of the bond with the effective interest rate and the number of months we can get the bond interest expense and the same is to be considered