On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is
A) $8,000
B) $2,000
C) $4,000
D) $10,000

Question

Quizplus · Accepted Answer

Semiannual discount amortization amount = (Face value - Issue price) / (5 × 2) = ($2,000,000 - $1,960,000) / 10 = $4,000

On January 1, $2,000,000, 5-Year, 10% Bonds, Were Issued for $1,960,000