Question

On January 1, 2021, Legion Company sold $260,000 of 8% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $200,356, priced to yield 12%. 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:_____.
a. $15,600.
b. $7,800.
c. $31,200.
d. $10,232.

Answer 1

Answer:

$12,021

Explanation:

Calculation to determine what Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of:

Using this formula

Interest paid =[Bonds amount*(Priced to yield/2)]

Let plug in the formula

Interest paid = $200,356*( 12%/2)

Interest paid=$200,356*6%

Interest paid =$12,021

Therefore Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of:$12,021