Question

On November​ 1, 2018, Arch Services issued $304,000 of eight−year bonds with a stated rate of 9​% 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

$4,560

Step-by-step explanation:

The computation of the interest expense is shown below:

= Principal × rate of interest × number of months ÷ (total number of months in a year)

= $304,000 × 9% × (2 months ÷ 12 months)

= $4,560

We simply apply the simple interest formula

The two months are calculated from November​ 1, 2018, to December​ 31, 2018

Thus, we considered all the things for computation.