Bond Issued at a Discount Bell Corporation issues a 5-year bond with a par value of $700,000 and a stated interest rate of 9 percent for $624,302. The current market rate for similarly rated bonds is 12 percent at the time of issue. Assuming the bonds are issued on January 1, pay interest annually on December 31, and the effective-interest method of amortization is used in computing interest expense:

a. What amount of interest expense will Bell report for the first year?

b. Prepare a bond interest and amortization table for the life of the bonds, as illustrated in Exhibit 11-5.

c. What is the book value of the bonds at the end of the second year?