Question

On January 1 of the current year, Franklin Ltd. issued $500,000 (par value) 10%, six year...

On January 1 of the current year, Franklin Ltd. issued $500,000 (par value) 10%, six year bonds when the market rate was 9%, receiving $522,430 cash proceeds. Interest is payable annually on December 31.The corporation uses the effective interest method for amortization of bond premium or discount.

Instructions

    a.    Calculate the interest expense for the first year.

    b.    Calculate the interest expense for the second year.

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