Answer:
Mirada, Inc.
The interest expense that Mirada would record for 2020 is:
$6,315 ($8,000 - $1,685).
Explanation:
a) Data and Calculations:
Face value of bonds = $100,000
Annual interest rate = 8%
Annual interest expense = $8,000 ($100,000 * 8%)
Issued value of the bonds = $108,425
The bonds were issued at a premium of $8,425
Premium Amortization over five years on a straight-line basis = $1,685 ($8,425/5).
This implies that the interest expense will be reduced by $1,685 per annum.
