McAndrews Corporation issued $400,000 of 6.5?% 10?-year bonds. The bonds are dat
ID: 2510263 • Letter: M
Question
McAndrews Corporation issued $400,000 of 6.5?% 10?-year bonds. The bonds are dated and sold on January? 1, 2015. Interest payment dates are January 1 and July 1. The bonds are issued for $385,788 to yield the market interest rate of 77?%. McAndrews Corporation uses the? effective-interest method. What is the amount of interest expense that McAndrewsMcAndrews Corporation will record on July? 1, 2015, the first semiannual interest payment? date? (All amounts rounded to the nearest? dollar.)
he bonds are dated and sold on January 1 20 5. nterest pa men da es are anuary and ul T ebon sare ssued or 33 d vei e market interes rate o McAndrews Corporation issued S400,000 o 6.5% 0-year bonds 7%. McAndrews Corporation uses the ellective-interest method. What is the amount of Interest expense that McAndrews Corporation will record on July 1, 2015, the first semlannual Interest payment date? (All amounts rounded to the nearest dollar.) OA. $503 OB. S13.000 ??· $14.980 O D. $13,503Explanation / Answer
Face Value of Bonds = $400,000
Proceed from Issue = $385,788
Annual Interest Rate = 7%
Semiannual Interest Rate = 3.50%
1st Semiannual Interest Payment:
Interest Expense = Semiannual Interest Rate * Proceed from Issue
Interest Expense = 3.50% * $385,788
Interest Expense = $13,503
McAndrews Corporation will record $13,503 on July 1, 2015