On January 1,2019,Chin Corporation Issued $2,900,000,16%,5-Year Bonds

question 54

Multiple Choice

On January 1,2019,Chin Corporation issued $2,900,000,16%,5-year bonds.The bond interest is payable on January 1 and July 1.The bonds sold for $3,119,600.The market rate of interest for these bonds was 14%.Under the effective-interest method,what is the interest expense for the six months ending July 1,2019?

• A)$203,000
• B)$249,568
• C)$218,372
• D)$232,000

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the price of a product.

Net Operating Income

The profit generated from a business's normal core operations, excluding deductions of interest and taxes.

Variable Costing

An accounting method that only includes variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product cost.

Unit Product Cost

Unit product cost is the total expense incurred to produce, assemble, and prepare a single unit for sale, encompassing both direct costs and allocated overheads.