On December 31,2013,a corporation issued $200,000 face value,12 percent bonds that mature 10 years from the date of issue.The issue price was 103.If the firm uses the straight-line method of amortization,interest expense for 2014 will be reported at

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The bonds were issued at a premium (103% of face value), so the issue price is $206,000. The premium of $6,000 ($206,000 - $200,000) is amortized over 10 years, resulting in an annual amortization of $600 ($6,000 / 10). The annual interest payment is $24,000 (12% of $200,000). The interest expense is the interest payment minus the amortization of the premium: $24,000 - $600 = $23,400.

On December 31,2013,a Corporation Issued $200,000 Face Value,12 Percent Bonds