I need help with a math problem

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On October 1, 2010 Macklin Corporation issued 5%, 10-year bonds with a face value of $1,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

Bond interest expense reported on the December 31, 2010 income statement of Macklin Corporation would be
a. $11,500
b. $12,500
c. $13,500
d. $23,000

Nov 19th, 2015

Thank you for the opportunity to help you with your question!

On October 1, 2010 Macklin Corporation issued 5%, 10-year bonds with a face value of $1,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.

Bond interest expense reported on the December 31, 2010 income statement of Macklin Corporation would be
b. $12,500

Annual Int payable is 5%*$1,000,000 = $50,000
Oct-Dec is 3 months.
So Int Payble is $50,000*3/12 = $12,500

Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 19th, 2015

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Nov 19th, 2015
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