Market yield for bonds of similar risk and maturity

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Reference no: EM131453371

On January 1, 2016, Masterwear Industries issued $600,000 of 10% bonds, dated January 1. Interest of $30,000 is payable semiannually on June 30 and December 31. The bonds mature in three years. The market yield for bonds of similar risk and maturity is 12%. The entire bond issue was purchased by United Intergroup, Inc.

1. Will the bond interest expense reported in the second year under effective interest method be the same as, greater than, or less than the amount that would be reported if the SL method of amortization were used?

2. Will the total bond interest expense for the life of the bond under effective interest method be the same as, greater than, or less than the total interest expense if the SL method of amortization were used?

Reference no: EM131453371

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