On January 1, 2016, Legion Company sold $210,000 of 6% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $137,739, priced to yield 12%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2016, in the amount of (Round your answer to the nearest dollar amount):
A. $6,300
B. $12,600
C. $8,264
D. $25,200
Answer: C. $8,264
Working notes for the above answer is as under
we have been provided with the information as follow
Legion Company sold $210,000 of 6% ten-year bonds.
Interest is payable semiannually on June 30 and December 31.
The bonds were sold for $137,739, priced to yield 12%.
Legion records interest at the effective rate.
Now we will calculate interest as follow
bonds were sold $137,739,
So,
$ 137739 *6%
=$8,264
Legion should report bond interest expense for the six months ended June 30, 2016 = $ 8264
