On January 1, Year 1, Weller Company issued bonds with a $400,000 face value, a stated rate of interest of 10%, 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%. Interest is paid annually on December 31. Assuming Weller issued the bond for $453,681, what is the amount of interest expense that will be recognized during Year 3? (Round the final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The correct answer is A.The amount of interest expense that will be recognized during Year 3 is $35,678. This is calculated by multiplying the carrying value of the bond at the beginning of the year by the effective interest rate. The carrying value of the bond at the beginning of the year is $453,681. The effective interest rate is 9.25%. Therefore, the amount of interest expense that will be recognized during Year 3 is $453,681 * 9.25% = $35,678.

On January 1, Year 1, Weller Company Issued Bonds with a $400,000