What is the interest expense on the bonds in 2014?
A)$800,000.
B)$680,759.
C)$342,961.
D)$119,241.

Question

Quizplus · Accepted Answer

To calculate the interest expense on bonds, we need to multiply the face value of the bond by the coupon rate. In this case, the face value of the bond is $20,000,000, and the coupon rate is 3.5%. So, the annual interest expense will be:
$20,000,000 x 3.5% = $700,000
However, the bonds were issued on October 1, 2014, which means that they were outstanding for only three months in 2014 (October, November, and December). So, the interest expense for 2014 will be:
$700,000 x 3/12 = $175,000
Therefore, the correct answer is B) $680,759.

What Is the Interest Expense on the Bonds in 2014