On January 3, 2014, Moss Company acquires $300,000 of Adam Company’s 10-year, 10% bonds at a price of $319,254 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity.
Assuming that Moss Company uses the effective-interest method, what is the amount of interest revenue that would be recognized in 2015 related to these bonds?
a. $30,000
b. $31,925
c. $28,734
d. $28,619
Assuming that Moss Company uses the straight-line method, what is the amount of premium amortization that would be recognized in 2016 related to these bonds?
a. $1,925
b. $1,266
c. $1,380
d. $1,506