Question

On January 1, 2021, Legion Company sold $240,000 of 4% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $150,272, 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.) Multiple Choice $4,800. $12,000. $7,514. $19,200.

Answer 1

Answer:

$7,514

Explanation:

Calculation for how Legion should report bond interest expense for the six months ended June 30, 2021

Using this formula

Bond interest expense=Bonds amount*Priced to yield percentage

Bond interest expense=$150,272*(10%/2)

Bond interest expense=$150,272*5%

Bond interest expense=$7,513.6

Bond interest expense=$7,514 Approximately

Therefore Legion should report bond interest expense for the six months ended June 30, 2021 in the amount of $7,514