On January 1 Browne Inc. issued $5000000 9% bonds for $4685000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Browne uses the effective-interest method of amortizing bond discount. At the end of the first year Greene should report unamortized bond discount of

Question

Quizplus · Accepted Answer

The bond discount is $5000000 - $4685000 = $315000. 
Using the effective-interest method, the interest expense for the first year is ($4685000 x 10%) = $468500. 
The bond discount amortization is ($468500 - $450000) = $18500. 
Therefore, the unamortized bond discount at the end of the first year is ($315000 - $18500) = $296500.