On January 1, Year 1, Weller Company issued bonds with a $380,000 face value, a stated rate of interest of 10.00%, and a 10-year term to maturity. Weller uses the effective interest method to amortize bond discounts and premiums. The market rate of interest on the date of issuance was 8.00%. Interest is paid annually on December 31. Assuming Weller issued the bond for $430,997, what is the amount of interest expense that will be recognized during Year 3? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Question

Quizplus · Accepted Answer

The correct answer is C.The amount of interest expense that will be recognized during Year 3 is $33,894.The effective interest rate is 9.00%.The amount of interest expense for Year 3 is $380,000 x 9.00% = $34,200.The amount of amortization of the bond discount for Year 3 is $316.The amount of interest expense that will be recognized during Year 3 is $34,200 - $316 = $33,894.

On January 1, Year 1, Weller Company Issued Bonds with a $380,000