Final answer:
The total interest income over the life of the bond is the interest received minus the amortized premium. With a 6% annual rate on a $30,000 bond over 10 years, the interest is $18,000 minus a $900 premium, resulting in $17,100. The closest available option, however, is $18,000, suggesting a possible error in question choices.
Step-by-step explanation:
The student asked about the total interest income that will be reported over the life of a bond investment if the bonds were purchased at a premium (103, indicating 103% of par) and the company uses the straight-line amortization method.
Firstly, the annual interest received is calculated as 6% of the par value of $30,000, which amounts to:
0.06 × $30,000 = $1,800
Over the 10-year life of the bond, this sums up to $18,000 in interest income ($1,800 per year × 10 years).
Since the bond was purchased at 103, the bond was bought at a premium, meaning $30,000 × 1.03 = $30,900. The premium amortized over the life of the bond is $900 ($30,900 - $30,000), or $90 per year over 10 years.
The total interest income reported will then be the interest received minus the amortized premium:
$18,000 (total interest received) - $900 (total premium amortized) = $17,100
As the options provided do not match this correct answer, there might be an error in the question or the answer choices provided. Therefore, the closest answer from the choices, accounting for possible mistakes in the question, would be $18,000 (ignoring the premium amortization).