Question

On November​ 1, 2017, Austin Services issued​ $304,000 of​ five-year bonds with a stated rate of​ 11%. The bonds were issued at​ par, and Austin makes semiannual payments on April 30 and October 31. On December​ 31, 2017, Austin made an adjusting entry to accrue interest at​ year-end. No further entries were made until April​ 30, 2018, when the first payment was made. What amount of interest expense was recorded for the period of January 1 to April​ 30, 2018?​ (Do not round any intermediate​ calculations, and round your final answer to the nearest​ dollar.)

Answer 1

Answer:

The amount of interest expense was recorded for the period of January 1 to April​ 30, 2018 would be $11,147

Explanation:

According to the given data we have the following:

Bonds Amount=$304,000  

Stated rate of interest=11%  

To calculate the amount of interest expense was recorded for the period of January 1 to April​ 30, 2018 we have to calculate the following formula as follows:

Interest expense for period(Jan-April)=Semi Annual Interest-Interest expense payable on Dec31

Semi Annual Interest=$304,000*11%*6/12= $16,720    

Interest expense payable on Dec31=$304,000*11%*2/12=$5,573    

Therefore Interest expense for period(Jan-April)=$16,720-$5,573=$11,147      

The Journal Entry would be as follows:    

                                                                 Debit $ Credit $

30-Apr Interest expense Account Dr.  $11,147  

Interest expense Payable Account Dr.           $5,573  

                                               Cash Account    $16,720