Question

On January 1, 2018, Lizzy's Lemonade issues 5%, 20-year bonds with a face amount of $81,000 for $71,638, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2018, the first interest payment date

Answer 1

The amount of $2,149.14 will be recorded on June 30, 2018 , the first interest payment date.

Step-by-step explanation:

The data below were extracted from the above information

Face amount $81,000

rate 5%

Issue price $71,638

Yield 6%

Since we already know that interest is paid semi annually, then ;

Amount of interest expense will be = issue price × yield

= $71,638 × 6% × 1/2

= $2,149.14

Amount of interest expense is therefore $2,149.14, to be recorded on June 30, 2018, the first interest payment date.