On October 1,2015,German Company issued 12%,10-year,$400,000 bonds at 105.Interest dates are April 1 and October 1.The amount of straight-line amortization for 2015 is:

Question

Quizplus · Accepted Answer

The amount of bonds issued is $400,000 * 105% = $420,000. 
To calculate the straight-line amortization, we need to divide the premium by the number of interest periods over the life of the bond. 
Premium = $420,000 - $400,000 = $20,000 
Number of interest periods over the life of the bond = 10 years * 2 = 20 
Straight-line amortization per period = $20,000 / 20 = $1,000 
Since the bond was issued on October 1, 2015, there is only one interest period left in 2015. Therefore, the amount of straight-line amortization for 2015 is $1,000 / 2 = $500.

On October 1,2015,German Company Issued 12%,10-Year,$400,000 Bonds at 105