1. EX.15-05 ALGO (Algonithmic) Interest on Bond Investments On February 1, Hanse
ID: 2430092 • Letter: 1
Question
1. EX.15-05 ALGO (Algonithmic) Interest on Bond Investments On February 1, Hansen Company purchased $102,000 of 6%, 10-year Knight Company bonds at their face amont plus one month's accrued interest. The bonds pay wheres on January 1 and July 1. On October 1, Hansen Company sold $37,200 of the Knight Company bonds acquired on February 1, plus three months accrued interest. On December 31, three months interest was accrued for the remaining bonds Determine the interest earned by Hansen Company on Knight Company bonds for the year. Do not round interim calculations. If required, round final answer to the nearest dollarExplanation / Answer
on Bonds valuing $37,200, Hansen company will earn interest for 8 months(feb to sept) = 37200*6%*(8/12) = $1,488.
On rest of the Bonds valuing 102000 - 37200 = $64,800, hansen company will earn interest for 11 months(feb to dec) = $64,800*6%*(11/12) = $3,564
Total Interest earned during the year = 1488+3564 = $5,052.
Note: There is another way too to calculate the accrued interest and the interest earned that is by passing the entries. It gives the same answer. I have solved in the simplest way.
In case of any clarifications, please do comment.Thank you.
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