Question

On November​ 1, 2018, Arch Services issued​ $313,000 of​ eight-year bonds with a stated rate of​ 12% at par. Interest payments occur each April 30 and October 31. On December​ 31, 2018, Arch made an adjusting entry to accrue interest at​ year-end. What is the amount of Interest Expense that will be recorded on December​ 31, 2018?​ (Do not round any intermediate​ calculations, and round your final answer to the nearest​ dollar.)

Answer 1

Interest Expense 6,260

Interest Payable 6,260

Step-by-step explanation:

face value 313,000

issued at 313,000

From October 31th to December 31th

2 months of interest has been accrued

rate = 12% annual

12% divided by 12 = 1% monthly rate

then 1% times 2 = 2% rate for the period.

Now we calculate:

313,000 x 2% = 313,000 x 0.02 = 6,260