Question

the current carrying value of a bond is $ 486,223 and the face value value is $ 274,605. the effective interest rate is 6 while the contractural rate of interest is 16 with interest payments semiannually on july 1 and january 1. rounding to the nearest dollar, what is the amont of bond interest expense to be recorded on july1?

Answer 1

To calculate the bond interest expense on July 1, multiply the carrying value of the bond by the effective interest rate and divide it by the number of interest payment periods in a year.

Step-by-step explanation:

The amount of bond interest expense to be recorded on July 1 can be calculated by multiplying the carrying value of the bond by the effective interest rate and dividing it by the number of interest payment periods in a year.

First, we need to calculate the semiannual interest payment by multiplying the face value of the bond by the contractual rate of interest and dividing it by the number of interest payments in a year. In this case, the semiannual interest payment would be $274,605 * (16%/2) = $21,988.80.

Next, we can calculate the bond interest expense for July 1 by multiplying the carrying value of the bond by the effective interest rate and dividing it by the number of interest payment periods in a year. In this case, the bond interest expense would be $486,223 * (6%/2) = $7,293.35.