Question

On January 1, Novak Corp. issued $3600000, 14%, 5-year bonds with interest payable on December 31. The bonds sold for $3859546. The market rate of interest for these bonds was 12%. On the first interest date, using the effective-interest method, the debit entry to Interest Expense is for

Answer 1

the debit entry to Interest Expense is $463,145.52

Step-by-step explanation:

The computation of the debit entry to Interest Expense is given below:

= Bonds carrying value × Market rate of interest

= $3,859,546 × 12%

= $463,145.52

Hence, the debit entry to Interest Expense is $463,145.52

We simply applied the above formula and the same is to be considered