On January 31, 2021, B Corp. issued $600,000 face value, 12% bonds for $600,000 cash. The bonds are dated December 31, 2020, and mature on December 31, 2030. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should B report in its September 30, 2016, balance sheet?

a. $18,000.

b. $36,000.

c. $54,000.

d. $48,000.

a. $18,000

Explanation:

Data given

Face value = $600,000

Bonds = 12%

The computation of accrued interest payable is shown below:-

Accrued interest to be reported as at Dec 31 = Face value * Interest rate * Time period (From July to September)

= $600,000 * 12% * (3 : 12)

= $600,000 * 3%

= $18,000

Therefore for computing the accrued interest payable we simply applied the above formula.