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Required information P10-10 Preparing a Bond Amortization Schedule for a Bond Issued at a Premium L010-5 The following inform
P10-10 Part 8 8. What amount of interest expense will be reported on the income statement for Year 2 and Year 3? (Round your
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Answer #1
Date Cash Interest Amortization Balance
Jan. 1, year 1 44,799
End of year 1 1,980 1,792 188 44,611
End of year 2 1,784 44,415
End of year 3 1,777 203
End of year 4 1,768 44,000

Interest rate = Interest expense of year 1/Outstanding balance at the beginning of year 1

= 1,792/44,799

= 4%

Interest expense for year 2 = Outstanding balance at the end of year 1 x Interest rate

= 44,611 x 4%

= $1,784

Interest expense for year 3 = Outstanding balance at the end of year 2 x Interest rate

= 44,415 x 4%

= $1,777

Interest expense
Year 2 $1,784
Year 3 $1,777

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