On November 1, 20X1, Mason Corp. issued $800,000 of its 10-year, 8% term bonds dated October 1, 20X1. The bonds were sold to yield 10%, with total proceeds of $700,000 plus accrued interest. Interest is paid every April 1 and October 1. What amount should Mason report for interest payable in its December 31, 20X1, balance sheet?
Your

a. $17,500
b. $16,000
c. $11,667
d. $10,667

correct option is b. $16,000

Explanation:

given data

issued price = $800,000

time = 10 year

rate = 8%

bond sold to yield = 10%

total proceeds = $700,000

time = 3 month

solution

we get here Interest payable on December 31, 20X1 as

Interest payable = issued price × rate × time ............1

put here value and we get

Interest payable = $800,000 × 8% ×    

Interest payable = $16000

so correct option is b. $16,000

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