Neville Company issued $100,000 of 6%,ten-year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization,which of the following statements is true? Assume interest is paid annually.

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The interest payment is $6,000 ($100,000 * 6%). The interest expense for the first period is $5,387 ($107,732 * 5%). The premium amortization is the difference: $6,000 - $5,387 = $613.

Neville Company Issued $100,000 of 6%,ten-Year Bonds When the Market