Moab Corporation sells $500,000 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 calculated as the difference between the face value and the selling price. The bonds are sold for 98% of their face value, so the discount is 2% of $500,000, which equals $10,000.

Moab Corporation Sells $500,000 of 7%,20-Year Bonds for 98 on January