On September 30, 2016, Illusions, Inc. recorded their semi-annual bond interest expense that contained a credit to Discount on bonds payable of $1,800. The adjusting entry on December 31, 2016 will show a credit to Discount on bonds payable of: (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The semi-annual bond interest expense was already recorded and included a credit to Discount on bonds payable. Therefore, the remaining balance of the discount account should be spread out evenly over the remaining life of the bonds until maturity. Since there are two semi-annual periods between September 30 and December 31, the amount of discount to be amortized for one period is $1,800/2 = $900. Therefore, the adjusting entry on December 31, 2016 will show a credit to Discount on bonds payable of $900.