On November 1,20A,Duval Company sold (issued)300,$1,000,ten-year,7% bonds at 97.The bonds were dated November 1,20A,and interest is payable each November 1 and May 1.What would be the amount of discount amortization at each semi-annual interest date (assume straight-line amortization)?

Question

Quizplus · Accepted Answer

The total discount on the bonds is calculated as follows:
300 bonds x $1,000 face value x (100% - 97%) = $90,000

Since the discount is being amortized straight-line over the 10-year life of the bonds, we can calculate the amount of discount amortized each year and then divide by 2 for the semi-annual interest periods.

Discount amortization per year = $90,000 / 10 years = $9,000
Discount amortization per semi-annual period = $9,000 / 2 = $4,500

Therefore, the correct answer is C) $450.

On November 1,20A,Duval Company Sold (Issued)300,$1,000,ten-Year,7% Bonds at 97