Herman Company received proceeds of ₤377,000 on 10-year, 8% bonds issued on January 1, 2014. The bonds had a face value of ₤400,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Herman uses the straight-line method of amortization. What is the amount of interest Herman must pay the bondholders in 2014?

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The interest payment is calculated based on the face value of the bonds. The annual interest is 8% of ₤400,000, which is ₤32,000. Since the interest is paid semi-annually, the amount paid in 2014 (two periods) is ₤32,000.

Herman Company Received Proceeds of ₤377,000 on 10-Year, 8% Bonds