On June 30, 2021, L. N. Bean issued $11 million of its 8% bonds for $10...

On June 30, 2021, L. N. Bean issued $11 million of its 8% bonds for $10 million. The bonds were priced to yield 10%. Interest is payable semiannually on December 31 and July 1. If the effective interest method is used, how much bond interest expense should the company report for the 6 months ended December 31, 2021?

Multiple Choice

$460,000
$550,000
$440,000
$500,000

Expert Solution

Interest expense for the 6 months ended December 31, 2021 = Carrying value * Effective interest rate/2

= $10,000,000 * 10% / 2

= $500,000

ekkarill92 answered 2 years ago

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