Question

On January 1, 2021, Lizzy's Lemonade issues 6%, 10-year bonds with a face amount of $98,000 for $91,035, priced to yield 7%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2021, the first interest payment date

Answer 1

Answer: $3186

Explanation:

The interest expense that will be recorded on June 30, 2021, the first interest payment date will be calculated as:

= Issue price × Yield price × 1/2

= $91035 × 7% × 1/2

= $91035 × 7/100 × 1/2

= $91035 × 0.07 × 0.5

= $3186