Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
7th Edition
ISBN: 9781260581256
Author: John Wild
Publisher: McGraw-Hill Education
Question
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Chapter C, Problem 1MCQ
To determine

Bonds:

Bonds are financial instrument, generally issued to raise a large amount of debt with an assurance to repay the sum with applicable interest.

To identify: The correct option

Expert Solution & Answer
Check Mark

Explanation of Solution

Option d, $625 is correct.

Given,

Value of bond is $30,000.

Interest rate is 5%.

Interest paid on February 1 and on August 1.

Calculate amount of interest accrued on December 31.

Formula to calculate the interest is,

  Interest=Value of bond×Interest rate×Number of months

Substitute $30,000 for value of bond, 5% for interest rate and 5 months (from August to December) in the above equation.

  Interest=$30,000×5100×512=$625

Thus, the amount of interest revenue accrued at December 31 is $625.

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