On january 1, 2016, a company issued $400,000 of 10-year, 12% bonds. the interest is payable semi-annually on june 30 and december 31. the issue price was $413,153 based on a 10% market interest rate. the effective-interest method of amortization is used. rounding all calculations to nearest whole dollar, what is the interest expense for the six-month period ending june 30, 2016?
a. $24,000.
b. $24,789.
c. $20,000.
d. $20,658.

d. $20,658.

Explanation:

The computation of the interest expense for the six months is shown below:

= Issue price × market rate of interest × number of months ÷ (total number of months in a year)

= $413,153 × 10% × (6 months ÷ 12 months)

= 20658

The six months is computed from On January 1, 2016 to June 30, 2016

We simply apply the formula so that the accurate value can come.

answer; that person may have a larger tax bill to pay on income taxes;

the answer is a.

by: nicholas dooley