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On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Respuesta :

Answer:

The question says ; Determine the total interest expense for Year 1, using the interest method.

Explanation:

  • Total interest expense = Issue price x Market rate x Time
  • Issue price = $37,282,062
  • market rate = 8%
  • Time = December 31 - June 30 which is approximately 6months

Plugging the values in the equation ;

  • = 37282062 x 8% x 6/12 = $1491282.48

Total interest expense = $1491282.48

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