Question

intertech corporation needed financing to build a new manufacturing plant. on june 30 of this year, intertech issued $4,350,000 of 8-year bonds with a 6% coupon rate (payments due on december 31st and june 30th). the effective interest rate was 8%. what amount in interest expense did intertech record for the june 30, payment in the next year?

Answer 1

The interest expense did InterTech record for the December 31, 2017 payment is $153725.

How is interest expense calculated?

Multiplying a company's total debt by the average interest rate on its obligations yields the most straightforward approach to determine interest expenditure.

The charges that a borrower incurs on a recurring basis as a result of a debt financing arrangement are represented by interest expense. The cost of borrowing money in the form of debt is conceptually what interest expense is.

Because interest expenditure is a non-core element of a company's business strategy, it is shown in the income statement's non-operating part.

The phrase "Interest Expenditure, Net" indicates that the company's interest expense has been offset by its interest income, which is the revenue from short-term investments like marketable securities.

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