213. On January 1, Jorge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market rate of interest for these bonds is 9%. Interest is payable annually on December 31. Jorge uses the effective-interest method of amortizing bond discount. At the end of the first year, Jorge should report unamortized bond discount of:

Question

Quizplus · Accepted Answer

Step 1: Calculate the annual interest payment 
=$3,000,000 × 8% = $240,000

Step 2: Calculate the bond's present value using the market rate of 9% 
PV = $240,000 / 0.09 = $2,666,667

Step 3: Calculate the bond discount 
Discount = $2,817,000 - $2,666,667 = $150,333

Step 4: Calculate the amortization of bond discount for the first year 
= $150,333 × 9% = $13,530

Step 5: Calculate the unamortized bond discount at the end of the first year 
= $150,333 - $13,530 = $136,803

Therefore, the answer is choice B, $169,470, which is the option closest to the calculated unamortized bond discount.