On January 1, 2012, a bond has a carrying value of $89,280 and a face value of

Question:

On January 1, 2012, a bond has a carrying value of $89,280 and a of $100,000. The market rate of interest is 9% and the stated rate of interest on the bond is 10%. Interest is paid on December 31 of each year.
Required
Calculate interest paid and interest expense for 2012 under the effective interest method.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...