On January 1, 2017, Macie Company purchased Jefferson Company's 9% bonds with a face amount of $200,000 for $213,420 to yield 8%. The bonds mature on January 1, 2027, and Macie has both the intent and ability to hold these bonds to maturity. The bonds pay interest annually on December 31. Assuming Macie uses the effective interest method of amortizing the bond premium; interest income reported on the income statement for the year ended December 31, 2017, would be

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The effective interest method involves calculating interest income based on the carrying amount of the bond at the beginning of the period multiplied by the effective interest rate. The carrying amount of the bond at purchase is $213,420, and the effective interest rate is 8%. Thus, interest income for the year is $213,420 * 8% = $17,073.60, which rounds to $17,074.

On January 1, 2017, Macie Company Purchased Jefferson Company's 9