Question

On June 30, 2024, L. N. Bean issued $30 million of its 8% bonds for $28 million. The bonds were priced to yield 10%. Interest is payable semiannually on December 31 and July 1. If the effective interest method is used, how much bond interest expense should the company report for the 6 months ended December 31, 2024

Answer 1

$1,400,000

Step-by-step explanation:

Calculation to determine how much bond interest expense should the company report for the 6 months ended December 31, 2024

December 31, 2024 Bond interest expense = Carrying value * Effective interest rate/2

Let plug in the formula

December 31, 2024 Bond interest expense= $28,000,000 * 10% / 2

December 31, 2024 Bond interest expense= $1,400,000

Therefore the amount of bond interest expense should the company should report for the 6 months ended December 31, 2024 is $1,400,000