Sunrise Corporation issued$300,000 of 6%,10-year bonds on January 1,2021,for$311,076.This price provided a yield of 8%on the...

Sunrise Corporation issued$300,000 of 6%,10-year bonds on January 1,2021,for$311,076.This price provided a yield of 8%on the bonds.Interest is payable semiannually on June 30 and

December 31.If Sunrise uses the effective-interest method and fiscal year-end is on October 31,the amount of interest expense reported on the income statement for the year ended October 31,

2021 should be:

Expert Solution

Calculate interest expense for 2021
Interest expense for June 2021	$12,443	311076*(8%/2)
Coupon amount for June 2021	$9,000	300000*(6%/2)
Premium amortized	$3,443	12443-9000
Bond payable balance, 30th June 2021	$307,633	311076-3443
Interest expense for 4 months (July-Oct)	$8,204	307633(8%)(4/12)
Amount of interest expense	$20,647	(12443+8204)

Thus, amount of interest expense reported in income statement is $20,647

jeff jeffy answered 3 years ago

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