INTEREST PAYMENTS AND INTEREST EXPENSE FOR BONDS

(STRAIGHT LINE)

On December 31, 2007, Philips Corporation issued bonds with a total face amount of

$800,000 and a stated rate of 9 percent.

Required:

. Calculate the interest expense for 2008 if the bonds were sold at par.

. Calculate the interest expense for 2008 if the bonds were sold at a premium and the straight-line premium amortization for 2008 is $2,300.

. Calculate the interest expense for 2008 if the bonds were sold at a discount and the straight-line discount amortization for 2008 is $1,700.

Exercise