Question

On May 1 of the current year, Cassandra Corp. issued $600,000 of 4% bonds payable at par with interest payment dates of April 1 and October 1. In its balance sheet for the current year ended December 31, what amount of accrued bond interest payable should Cassandra report?

Answer 1

Answer:

$16,000

Explanation:

This can be calculated as follows:

Annual bond interest = $600,000 × 4% = $24,000

Accrued bond interest for 8 months (May 1 to December 31) = $24,000 × (8 ÷ 12) = $16,000.

Therefore, $16,000 is the amount of accrued bond interest payable that Cassandra should report.