Question

On January 1, 2020, Crane Company sold to Blossom Company $740000 of its 8% bonds for $655119 to yield 11%. Interest is payable semiannually on January 1 and July 1. What amount should Crane report as interest expense for the six months ended June 30, 2020? a) $36032 b) $26205 c) $40700 d) $29600

Answer 1

Answer:

a) $36032

Explanation:

The computation of the interest expense reported is shown below:

= BOnd value × rate of interest × given months ÷ total months

= $655,119 × 11% × 6 months ÷ 12 months

= $36,032

Hence, the amount that should be reported as interest expense is $36,032