Question

cember 31 of each year. Rupar accounts for the bonds as a held-to-maturity investment, and uses the effective interest method. In Rupar's December 31, 2021, journal entry to record the second period of interest, Rupar would record a credit to interest revenue of

Answer 1

B. $3,373

Step-by-step explanation:

The computation is given below:

For Held- to -Maturity investment

Face Value of the bond = 100,000

Coupon rate = 6%, for Semi-annual Period should 6% ÷ 2 = 3%

Effective rate = 7% For Semi-annual Period should be 7% ÷ 2 = 3.5%

Now

Purchase Price of the Bond is

= 100,000 - 4000

= 96,000

Now

First interest :

Cash interest = 100,000 × 3% = 3,000

interest Revenue = 96,000 × 3.5% = 3,360

So,

Discount Amortized is

= 3360 - 3,000

= 360

And,

Carrying Value of the Bond should be

= 96,000 + 360

= 96,360

For Second YEar

Interest Revenue = Carrying Value Effective interest Rate

= 96,360 × 3.5%

= 3,372.6

= $3,373