On December 31, 2019, a corporation issued $180,000 face value, 8 percent bonds that mature 10 years from the date of issue. The issue price was 104. If the firm uses the straight-line method of amortization, interest expense for 2020 will be reported at

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The bonds were issued at a premium (104% of face value), so the issue price is $187,200 ($180,000 x 1.04). The premium of $7,200 ($187,200 - $180,000) is amortized over 10 years, which is $720 per year. The annual interest payment is $14,400 ($180,000 x 8%). The interest expense is the interest payment minus the amortization of the premium: $14,400 - $720 = $13,680.

On December 31, 2019, a Corporation Issued $180,000 Face Value