Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually. Interest is paid semi-annually. A portion of the spreadsheet appears as follows: What formula should Ohlson use in cell C8 to calculate interest expense for the first interest payment?
A) =B8 - D8
B) =E7*B3
C) =E7*B3/2
D) =E7*C2/2

Question

Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually. Interest is paid semi-annually. A portion of the spreadsheet appears as follows:  What formula should Ohlson use in cell C8 to calculate interest expense for the first interest payment?
A) =B8 - D8 
B) =E7*B3 
C) =E7*B3/2 
D) =E7*C2/2

Quizplus · Accepted Answer

Semiannual interest expense is one-half the effective rate (C2/2) times the outstanding balance (E7).

Ohlson Co Is Preparing an Excel Spreadsheet for Its 20-Year, 4