McVay Corporation issued $200,000 of 60% 10-year bonds. The bonds are dated and

Question

McVay Corporation issued $200,000 of 60% 10-year bonds. The bonds are dated and sold on January 1, 2016. Interest payment dates are January 1 and July 1 Tre bonds are issued to yield the market interest rate of 7%. The price of the bonds (amount raised from issuance) is $185788. McVay Corporation uses the method. What is the amount of interest expense that McVay Corporation will record on July 1, 2016, the first semiannual interest payment date? (All amounts rounded to the nearest dollar.) O A. $503. OB, $6.503 O C. $7.490 O D. $6,000

Explanation / Answer

1) Answer (B) $6,503

Calculation :

Interest expense under effective interest method = $185,788 * 7% * 6/12

= $6,503

2) Answer (B) Cost of land includes fencing and paving

Explanation : Cost of land include landscaping,lighting,drainage,legal charges but doesnt include Fencing and paving charges.

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