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5 January, 09:20

On November 1, 2018, Arch Services issued $313,000 of eight-year bonds with a stated rate of 12% at par. Interest payments occur each April 30 and October 31. On December 31, 2018, Arch made an adjusting entry to accrue interest at year-end. What is the amount of Interest Expense that will be recorded on December 31, 2018? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

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  1. 5 January, 09:24
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    Interest Expense 6,260

    Interest Payable 6,260

    Explanation:

    face value 313,000

    issued at 313,000

    From October 31th to December 31th

    2 months of interest has been accrued

    rate = 12% annual

    12% divided by 12 = 1% monthly rate

    then 1% times 2 = 2% rate for the period.

    Now we calculate:

    313,000 x 2% = 313,000 x 0.02 = 6,260
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