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Assuming Weller issued the bond for $434,940, what is the amount of interest expense that will be recognized during year 3?

(Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer :

$360,000-434,940 = 74,940/3 = 24980, 360,000 x 0.105 = 37,800, Interest expense each year: cash payment to bondholders + discount amortization per year 24980+ 37,800= 62780

The cost a company pays for borrowed funds is referred to as an interest expenditure. Interest expense is a non-operating item on the income statement. It denotes the amount of interest owed on all outstanding debt, including bonds, loans, convertible debt, and credit lines.

In the first scenario, the business will pay a fee for the cost of borrowing. One could be better able to understand a company's capital structure and financial results if they are aware of its interest costs.

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Complete Question:

On January 1, Year 1, Weller Company issued bonds with a $360,000 face value, a stated rate of interest of 10.50%, 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 8.50%. Interest is paid annually on December 31.

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