Question

Mcknight Corporation issued $ 2,100,000​, 15​-year, 4​% bonds for $ 2,016,000 on January​ 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the​ straight-line method of amortization. Mcknight​'s fiscal year ends on December 31. The amount of discount amortization on July​ 1, 2019​, would be?

Answer 1

Answer:

discount on bond payable  amortization for paymentof July 1st,2019:

2,800

Explanation:

face value 2,100,000

issued at   2,016,000

discount         84,000

striaght-line amortization:   disount / total payments

total payment: 15 year at 2 payment per year = 30

84,000/30 = 2,800 per payment

cash proceeds 2,100,000 x 0.04/2 = 42,000

interest expense 42,000 + 2,800 = 44,800

July 1, 2019

interst expense 44,800 debit

   discount on bond payable  2,800

   cash                                    42,000