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On January 1, 2025, Blue Company issued S1, 100, 000 face value, 7 %, 10-year bonds at $1, 180,961. This price resulted in a 6% effective - interest rate on the bonds. Blue uses the effective - interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. What is the interest expense to be recorded in 2026?

On January 1, 2025, Blue Company issued S1, 100, 000 face value, 7 %, 10-year bonds at $1, 180,961. This price resulted in a 6% effective - interest rate on the bonds. Blue uses the effective - interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. What is the interest expense to be recorded in 2026?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2025, Blue Company issued $1,100,000 face value, 7 %, 10-year bonds at $1, 180, 961. This price resulted in a 6% effective - interest rate on the bonds. Blue uses the effective - interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. What is the interest expense to be recorded in 2026?
Transcribed Image Text:On January 1, 2025, Blue Company issued $1,100,000 face value, 7 %, 10-year bonds at $1, 180, 961. This price resulted in a 6% effective - interest rate on the bonds. Blue uses the effective - interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. What is the interest expense to be recorded in 2026?
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