On January 1, Right Way Corporation issues $3,000,000, 5-year, 10% bonds for $2,910,000. Interest is paid semiannually on January 1 and July 1. Right Way uses the straight-line method of amortization. The amortization amount for the discount on bonds payable on July 1 is:
A) $9,000.
B) $90,000.
C) $30,000.
D) $29,100.

Question

Quizplus · Accepted Answer

The total discount on the bonds is $3,000,000 - $2,910,000 = $90,000. Since the bonds are for 5 years with semiannual interest payments, there are 10 periods. The straight-line amortization per period is $90,000 / 10 = $9,000.

On January 1, Right Way Corporation Issues $3,000,000, 5-Year, 10