Exhibit 14-3 Nazzi, Inc.sold $400, 000 of its 9%, five-year bonds dated January 1, 2010, on May 1, 2010, for $393, 000 plus accrued interest.Interest is paid on January 1 and July 1 and straight-line amortization is used.
-
Refer to Exhibit 14-3.The balance of Discount on Bonds Payable after the December 31, 2010, adjusting entry has been posted would be

Question

Quizplus · Accepted Answer

The amount of discount on bonds payable is $7,000 ($400,000 x 9% x 8/12). The straight-line amortization of discount for 2010 would be $1,400 ($7,000 ÷ 5 years ÷ 2 semi-annual periods), and the balance of discount on bonds payable after the adjusting entry would be $6,000 ($7,000 − $1,400).