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On January 1, 2017 Macie Company purchased Jefferson Company's 9% bonds with a face amount of...

On January 1, 2017 Macie Company purchased Jefferson Company's 9% bonds with a face amount of $200,000 for $213,420 to yield 8%. The bonds mature on January 1, 2027, and when Macie has both the intent and ability to hold these bonds to maturity. The bonds pay interest annually on December 31. Assuming Macie uses the effective interest method of amortizing the bond premium; interest income reported on the income statement for the year ended December 31, 2017, would be:

A) $16,000

B) $18,926

C) $18,000

D) $17,074

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Answer #1

Answer : $170,74

the face value of the Bond: 200,000

Issued Price = $ 213,420

Cash interest Receuived = $200,000*9% = 18,000

Interest Income = $ 213,420*8% = $17,074

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