On January 1, 2010, Reece Co.issued $120, 000 of 14% serial bonds for $114, 540.The bonds are to be redeemed at the rate of $30, 000 per year, beginning January 1, 2012.Using the bonds outstanding method, what would be total interest expense for 2010?

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The total interest expense for 2010 is calculated by multiplying the face value of the bonds ($120,000) by the interest rate (14%), resulting in $16,800. However, since the bonds were issued at a discount, the discount of $5,460 ($120,000 - $114,540) must be amortized over the life of the bonds. The bonds outstanding method allocates the discount based on the proportion of bonds outstanding. For 2010, the full amount is outstanding, so the entire discount is considered, resulting in an interest expense of $16,800 - $5,460 = $11,340. However, the correct calculation should consider the amortization of the discount over the life of the bonds, leading to a total interest expense of $9,180 for 2010.