On January 1, Year 1, Weller Company issued bonds with a $360,000 face value, a stated rate of interest of 10.50%, and a 10-year term to maturity. Weller uses the effective interest method to amortize bond discounts and premiums. The market rate of interest on the date of issuance was 8.50%. Interest is paid annually on December 31. Assuming Weller issued the bond for $390,440, what is the amount of interest expense that will be recognized during Year 3? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

First and foremost,find attached amortization schedule showing the opening balance of the bonds in each year,the interest expense which is the opening balance multiplied by market interest rate of 8.5% as well as the interest coupon which is face value of $360,000 multiplied by stated interest of 10.50% i.e $360,000*10.5%=$37,800

The interest expense in year 3 = opening balance in year 3*8.5%=$380,823*8.5% =$32,370

Tundexi Tundexi · Answer 2 · 2021-11-23T13:05:02+01:00

The amount of interest expense that will be recognized during Year 3 is $32,370.

For year 1

Cash paid = $360,000*10.5%

Cash paid = $37,800

Interest expense = $390,440*8.5%

Interest expense = $33,187

Premium amortization = $37,800 - $33,187

Premium amortization = $4,613

For year 2

Cash paid = $37,800

Interest expense = $385,827*8.5%

Interest expense = $32,795

Premium amortization = $37,800 - $37,800

Premium amortization = $5,005

For year 3

Cash paid = $37,800

Interest expense = $380,822 * 8.5%

Interest expense = $32,370

Therefore, The amount of interest expense that will be recognized during Year 3 is $32,370.

See similar solution here

brainly.com/question/16257629