question archive On May 1, 2012, Todd Company purchased $66,000 of 5% 12-year Lincoln Company bonds at par plus two months’ accrued interest
On May 1, 2012, Todd Company purchased $66,000 of 5% 12-year Lincoln Company bonds at par plus two months’ accrued interest
Subject:FinancePrice:2.89 Bought3
On May 1, 2012, Todd Company purchased $66,000 of 5% 12-year Lincoln Company bonds at par plus two months’ accrued interest. The bonds pay interest on March 1 and September 1. On October 1, 2012, Todd Company sold $24,000 of the Lincoln Company bonds acquired on May 1, plus one month’s accrued interest. On December 31, 2012, four months’ interest was accrued for the remaining bonds.
Determine the interest earned by Todd Company on Lincoln company bonds for 2012.
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Interest earned (May 1 to September 1)..................................................... $1,1001
Interest earned on sold bonds (September 1 to October 1)............................. 1002
Interest earned on remaining bonds (September 1 to December 1)................ 7003
Total interest earned in 2012....................................................................... $1,900
1$66,000 × 5% × 4/12
2$24,000 × 5% × 1/12
3$42,000 × 5% × 4/12
