Bond Issued at a Premium On January 1, Emperor Corporation issued $400,000 of 16-year bonds with a stated interest rate of 5 percent. Interest is paid at the end of each year. The current market rate for similarly rated bonds at the time of issue was 4 percent and Emperor received $446,610 when the bonds were issued. Assuming straight- line amortization of the bond premium is used in computing interest expense:

a. What amount of interest expense will Emperor report annually?

b. Prepare a bond interest and amortization table for the first 5 years the bonds are outstanding, as illustrated in Exhibit 11-4.

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