On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The amount of discount amortized each period is $1,634.69.
($500,000 - $473,845)/16 = $1,634.69

Question

Quizplus · Accepted Answer

The discount on the bond is $26,155 ($500,000 - $473,845). Since interest is paid semi-annually over 8 years, there are 16 periods. Dividing the total discount by 16 gives $1,634.69 per period.

On January 1, a Company Issued a $500,000, 10%, 8-Year