Answer:
1. The amount of annual interest:
If these are 10% term bonds, the annual interest that the issuer pays to the bondholders would be 10% of the face value of the bonds. Therefore, the annual interest would be:
USD 8,800,000 * 10% = USD 880,000
2. Effective revenue in 1 year under the interest method:
With the effective interest rate of 8%, the effective revenue from the bonds in the first year would be:
USD 8,800,000 * 8% = USD 704,000
3. The carrying amount at the end of year 1 under the interest method:
The carrying amount of the bonds at the end of the first year would be the initial amount of the bonds plus the difference between the annual interest and the effective revenue:
USD 8,800,000 + (USD 880,000 - USD 704,000) = USD 8,976,000
4. Effective interest revenue in year 2 under the interest method:
In the second year, the effective interest revenue would be calculated using the new carrying amount from the end of year 1:
USD 8,976,000 * 8% = USD 718,080
This is a simplified calculation and assumes that the bonds are issued at face value. If the bonds were issued at a discount or premium, those amounts would need to be considered when calculating the carrying amount and the effective interest revenue.