Question

On June 1 of the current year, Dahli Corp. issued $300,000 of 8% bonds payable at par with interest payment dates of April 1 and October 1. In its income statement for the current year ended December 31, what amount of interest expense should Dahli report?

Answer 1

Answer:

$14,000

Step-by-step explanation:

Amount issued = $300,000 of 8% bonds

Which means that

8/100 ×$300,000

= $24,000 annual interest

Therefore, they would pay

Monthly interest = $24,00/12 = $2000

Interest would be calculated from the day bond is issued. Interest would be calculated for seven (7) months (June - December).

Therefore, $2000×7 = $14000 interest expense