Chapter 14, Problem 6CPA

To determine

Bonds: Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Accrued interest: Accrued interest refers to the interest that is incurred but cash is not yet paid.

To Determine: The interest accrued on September 30, 2016 using the effective interest method.