On January 1, Year 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issue at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31. What is the amount of interest expense recorded on December 31, Year 1?

Question

Stacy Dixon

Business

3 December, 02:07

On January 1, Year 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issue at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31. What is the amount of interest expense recorded on December 31, Year 1?

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Answers (1)

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Zaid Meyers · Answer 1

The amount of interest expense which is to be recorded as on December 31, Year 1 is $8,000

Explanation:

Interest expense is the expense which is incurred or happen through an entity for the borrowed funds. It is the non-operating expense that shows or stated on the income statement.

The amount of interest expense which is to be recorded as on December 31, Year 1 is computed as:

Interest expense = Issued amount of bonds * Interest rate

where

Issued amount of bonds is $100,000

Interest rate is 8%

So, putting the values above:

Interest expense = $100,000 * 8%

Interest expense = $8,000