Amortization of Premium or Discount Bonds payable are dated January 1, 2017, and are issued on that date. The face value of the bonds is $125,000, and the face rate of interest is 12%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 10%. Use the appropriate present value table: PV of $1 and PV of Annuity of $1 Required: Note: When computing the issue price of the bonds, round your answer to the nearest dollar. Then use the rounded amount in subsequent computations. 1. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period? Round your answers to the nearest cent. Amount amortized 7,500 Amount of interest expense 2. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2017? What amount of interest expense should be reported for the period from July 1 to December 31, 2017? Round your answers to the nearest cent. Amount amortized Amount of interest expense Feedback Check My Work Amortization refers to the process of transferring an amount from the discount or premium account to interest expense each time period to adjust interest expense. The effective interest method of amortization amortizes discount or premium in a manner that produces a constant effective interest rate from period to period. The dollar amount of interest expense will vary from period to period, but the rate of interest will be constant. This interest rate is referred to as the effective interest rate and is equal to the market rate of interest at the time the bonds are issued