Moab Corporation sells $600,000 of 7%, 20-year bonds for 98 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. What is the amount of the discount at issuance?

Question

Quizplus · Accepted Answer

The discount on the bonds at issuance is the difference between the face value ($600,000) and the selling price (98% of $600,000). Selling price = 98% of $600,000 = 0.98 * $600,000 = $588,000. Discount = $600,000 - $588,000 = $12,000.

Moab Corporation Sells $600,000 of 7%, 20-Year Bonds for 98