Juneau Company issued 5-year $200,000 face value bonds at 95 on January 1, 2014. The stated interest rate on these bonds is 9%. If the effective interest rate is 10.33%, interest expense and the discount amortization in 2014 are

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The interest expense is calculated using the effective interest rate on the carrying amount of the bonds. The carrying amount at issuance is $190,000 (95% of $200,000). The interest expense for 2014 is $190,000 * 10.33% = $19,627. The cash interest paid is $18,000 (9% of $200,000), so the discount amortization is $19,627 - $18,000 = $1,627.

Juneau Company Issued 5-Year $200,000 Face Value Bonds at 95