A company uses the calendar year as its accounting period. It has 2,000 18% $1,000 par value bonds outstanding. The interest is paid semiannually on October 31st and May 1st of each year. How much bond interest expense is accrued each December 31st

Interest expense = 60,000

Explanation:

Given:

Number of bonds = 2,000

Face value of each Bond = $1,000

Total face value = $1,000 * 2,000 = 2,000,000

Rate of interest = 18% yearly = 0.18 = 0.18 / 2 = 0.09 semi-annual

Number of month = 2 month

Computation of interest expense from 1 st November to 31 December:

Interest expense = 2,000,000 * 0.09 * (2 / 6)

Interest expense = 60,000