To calculate the total amount of interest expense for 2022, subtract the premium amortization from the cash interest payment. The cash interest payment is calculated by multiplying the face value of the bonds by the coupon rate. The premium amortization is obtained by dividing the total premium by the number of years.
To calculate the total amount of interest expense for 2022, we need to determine the premium amortization for the year. The premium amount is the difference between the issue price and the face value of the bonds. In this case, the premium is $392,000 - $378,000 = $14,000.
The premium amortization for each year can be calculated by dividing the total premium by the number of years. So, the annual premium amortization is $14,000 / 5 = $2,800. Since we are using the straight-line method, the premium amortization will be the same for each year.
To calculate the total amount of interest expense for 2022, we need to subtract the premium amortization from the cash interest payment. The cash interest payment can be calculated by multiplying the face value of the bonds by the coupon rate. In this case, the cash interest payment is $378,000 * 9% = $34,020. So, the total amount of interest expense for 2022 is $34,020 - $2,800 = $31,220.