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    Interest expense

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    On January 1 of the current year, Elston Corporation issued $1,500,000 of 10% debenture bonds on a basis to yield 9%, receiving $1,567,290. Interest is payable annually on December 31 and the bonds mature in 6 years. The effective interest method is used.

    (a) What is the interest expense for the first year?
    (b) What is the interest expense for the second year?

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    Using the effective interest method, interest expense in year 1 is ...

    Solution Summary

    The solution explains the calculation of interest expense for the first and second year