On January 1, 2017, Always Corporation issues $2,600,000, 5-year, 11% bonds for $2,540,000. Interest is paid semiannually on January 1 and July 1. Always Corporation uses the straight-line method of amortization. The company's fiscal year ends on December 31. The amount of discount amortized on July 1, 2017 is:
A)$3000.
B)$6000.
C)$12,000.
D)$60,000.

Question

Quizplus · Accepted Answer

The total discount on the bonds is $60,000 ($2,600,000 - $2,540,000). Over 5 years, with semiannual payments, there are 10 periods. The discount amortized each period using the straight-line method is $6,000 ($60,000 / 10).

On January 1, 2017, Always Corporation Issues $2,600,000, 5-Year, 11