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.)

Question

Messiah Whitney

Business

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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Bianca Moyer · Answer 1

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