On January 1, 2018, an investor paid $299,000 for bonds with a face amount of $355,000. The stated rate of interest is 9% while the current market rate of interest is 11%. Using the effective interest method, how much interest income is recognized by the investor in 2018 (assume annual interest payments and amortization)?
Interest income is recognized by the investor in 2018 \(=\) Amount paid for bonds \(\times\) Current market rate of interest \(=\$ 299,000 \times 11 \%\)
\(=\$ 32,890\)
On January 1, 2018, an investor paid $299,000 for bonds with a face amount of $355,000....