On July 1, 2017, Pike Inc.issued $500,000, 9% bonds, which mature on July 1, 2027.The bonds were issued for $469,500 to yield 10%.Pike uses the effective-interest method of amortizing bond discount.Interest is payable annually on June 30.At June 30, 2019, the adjusted balance in the Bonds Payable account should be

Question

Quizplus · Accepted Answer

The effective interest rate for the bond is 10% per year, and the bond was issued for $469,500, which is $30,500 less than the face value of $500,000. Therefore, the discount on the bond is $30,500. 
Using the effective interest method, the amount of the discount amortized each year is calculated as follows:
Year 1: ($500,000 - $469,500) x 10% = $3,050
Year 2: (($500,000 - $469,500) - $3,050) x 10% = $2,798
The adjusted balance in the Bonds Payable account at June 30, 2019, would be the face value of the bond minus the total amount of discount amortized, which is calculated as follows:
Adjusted balance = $500,000 - $3,050 - $2,798 = $473,595
Therefore, the correct answer is C, $473,595.