Thx On January 1, 2016, Rupar retailer purchased $100,000 of Anand Company bonds

Question

Thx On January 1, 2016, Rupar retailer purchased $100,000 of Anand Company bonds at discount of $5,000. The Anand bonds pay 6% interest but were purchased vvhenthe market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannual, on January 1 and July 1 of each year. Rupar accounts for the bonds as a held-to-matunfy investment, and uses the effective interest method. In Rupar's December 31, 2016 journal entry to record the second period of interest, Rupar would record a credit to interest revenue of $3,325. $3,000. $3,500.

Explanation / Answer

Purchase price = 100,000-5,000 = 95,000

Interest revenue = 95000 * .07 *6/12 = 3325

correct option is "B"

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