On January 1, 2020, the City of Bingham sold a 15-year issue of tax-supported serial bonds to finance the construction and equipping of an annex to City Hall. As described in Chapter 5 of this cumulative problem, the total amount of bonds issued on that date was $6,000,000, sold with a $100,000 premium (yielding an effective interest rate of 1.5%). The issue bears interest at the stated annual rate of 2 percent, payable on January 1 and July 1 of each year; bonds in the amount of $200,000 will mature every six months until maturity. The premium on these bonds will be amortized using the effective interest rate method

[Para. 6-b-9] Checks totaling $260,000 were written and mailed to bondholders for all of the payments due July 1, 2020 (these payments are related to the 2% serial bonds). The principal payment is $200,000, and the interest payment is $60,000 ($6 million x 1%). At the government-wide level, the premium is amortized using the effective rate interest method. The effective interest rate is 1.5%. [REMINDER! Interest expense = book value of debt (bond payable + premium) * effective interest rate (1.5%). The difference between the cash payment and interest expense = premium amortization.]