Use the following information for questions 46 through 48.
Chang Corporation issued $4,000,000 of 9%, ten-year convertible bonds on July 1, 2014 at 96.1 plus accrued interest. The bonds were dated April 1, 2014 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $800,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion.
-What should be the amount of the unamortized bond discount on April 1, 2015 relating to the bonds converted?

Question

Quizplus · Accepted Answer

The total bond discount is $156,000 ($4,000,000 x 3.9%). The discount is amortized over 20 periods (10 years x 2), which is $7,800 per period. By April 1, 2015, three periods have passed, so $23,400 has been amortized. The unamortized discount is $132,600 ($156,000 - $23,400). The converted bonds represent 20% of the total issue ($800,000/$4,000,000), so the unamortized discount for the converted bonds is $26,520 ($132,600 x 20%).

Use the Following Information for Questions 46 Through 48