Weller Company issued bonds with a face value of $340,000, a 9.50% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Weller uses the effective interest method of amortization. The market rate of interest on the date of issue was 7.50%. Interest is paid annually on December 31.Assuming Weller issued the bond for $386,674, the amount of interest expense appearing on the Year 3 income statement would be:

Question

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The interest expense for Year 3 is calculated using the effective interest method: $386,674 (carrying amount at the beginning of Year 3) * 7.50% (market rate) = $28,487.

Weller Company Issued Bonds with a Face Value of $340,000