On January 1, 2017, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is
A)$29,100.
B)$9,000.
C)$2,424.
D)$750.

Question

Quizplus · Accepted Answer

The total discount on the bonds is $3,000,000 - $2,910,000 = $90,000. Over 10 years, this is $90,000 / 10 = $9,000 per year. Since interest is paid annually, the monthly amortization is $9,000 / 12 = $750.

On January 1, 2017, $3,000,000, 10-Year, 10% Bonds, Were Issued