The interest expense for the six-month period ending December 31,2019 is closest to:

A) $24,000.
B) $20,491.
C) $20,000.
D) $20,825.

Question

The interest expense for the six-month period ending December 31,2019 is closest to:A) $24,000.B) $20,491.C) $20,000.D) $20,825.

Bailey Gambrell · Accepted Answer

Final Answer : B, Explanation :  The correct answer is B. The interest expense for the six-month period ending December 31, 2019 is closest to $20,491. This is calculated as follows:Interest expense = Bond face value x Market interest rate x Time= $400,000 x 10% x 6/12= $20,000Amortization of bond discount = (Issue price - Bond face value) x Effective interest rate x Time= ($413,153 - $400,000) x 10% x 6/12= $491Total interest expense = Interest expense + Amortization of bond discount= $20,000 + $491= $20,491

The interest expense for the six-month period ending December 31,2019 is closest to:

A) $24,000.
B) $20,491.
C) $20,000.
D) $20,825.

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