On January 1, 2013, Sean purchased an 8%, $100,000 corporate bond for $92,277. The bond was issued on January 1, 2013, and matures on January 1, 2018. Interest is paid semiannually, and the effective yield to maturity is 10% compounded semiannually. On July 1, 2014, Sean sells the bond for $95,949. A schedule of interest amortization for the bond is shown in Table I:5-2.
TABLE I:5-2
Interest Amortization for Problem I:5-57

a. How much interest income must Sean recognize in 2013?
b. How much interest income must Sean recognize in 2014?
c. How much gain must Sean recognize in 2014 on the sale of the bond?

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Interest Received Amortization of Discount Interest Income $4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 $4,614 4,645 4,677 4,711 4,747 4,783 4,823 4,864 4,907 4,952 $614 645 677 6-30-13 12-31-13 6-30-14 12-31-14 6-30-15 12-31-15 6-30-16 12-31-16 6-30-17 12-31-17 747 783 823 864 907 952