Asked by
Yazdan Nikoo
on Nov 18, 2024
Verified
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
Straight-Line Method
A method of calculating depreciation by evenly allocating the cost of an asset over its useful life.
Semiannual Amortization
The process of periodically reducing the value of a debt or an intangible asset over two times in a year.
Issuing Corporation
A company that has issued securities through an initial public offering (IPO) and has its shares bought and sold by investors.
- Present the procedure for entering transactions related to bond issuance, interest payments on bonds, amortization of discounts/premiums, and bond redemptions in accounting records.
- Acquire knowledge on the procedures for amortizing bond discount and premium and how they influence interest expenses.
- Ascertain the cash inflow from bond issuance and the ongoing value of the bond during its lifetime.
Verified Answer
RI
Learning Objectives
- Present the procedure for entering transactions related to bond issuance, interest payments on bonds, amortization of discounts/premiums, and bond redemptions in accounting records.
- Acquire knowledge on the procedures for amortizing bond discount and premium and how they influence interest expenses.
- Ascertain the cash inflow from bond issuance and the ongoing value of the bond during its lifetime.