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Darya [45]
3 years ago
9

Tan Corporation issued $600,000,000 of 7% bonds on November 1, 2015, for $644,636,000. The bonds were dated November 1, 2015, an

d mature in 10 years, with interest payable each May 1 and November 1. The effective-interest rate is 6%. Prepare Tan’s December 31, 2015, adjusting entry. Use effective rate method of amortization
Business
1 answer:
jonny [76]3 years ago
7 0

Answer:

Interest Expense $6,446,360

Interest Payable $7,000,000

Explanation:

Interest Expense for the year =

Issued amount * Effective interest rate * \frac{Remaining months in the year}{Total months in the year}

$644,636,000 * 0.06 * 2/12 = $6,446,360

Interest Payable =

Face Value of the bond * Interest rate * \frac{Remaining months in the year}{Total months in the year}

$600,000,000 * 0.07 * 2/12 = 7,000,000

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