On January 2, 2012, Senate Inc. issued $10,000,000 of 10-year, 9% bonds at 87. How much of the discount will be amortized in the first year under the straight-line method?

Question

Quizplus · Accepted Answer

The discount is $10,000,000 - ($10,000,000 x 87%) = $1,300,000. The straight-line method amortizes the same amount of discount each year, so the amount to be amortized per year is $1,300,000 / 10 years = $130,000. Therefore, the answer is B.