Question

On June 30, 2024, L. N. Bean issued $20 million of its 8% bonds for $18 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, 2024

Answer 1

Step-by-step explanation:

Interest expense for 6 months ended Dec 31, 2024 = issue price of bonds* market interest rate

= $18,000,000* 10%*6/12

= $900,000