Crosson Company uses the straight-line method of amortization and had a ten-year, 12 percent, $1,000,000 bond issue outstanding that had been sold at a $12,000 discount in 2008. The bonds pay interest on June 30 and December 31, and the company's fiscal year end is December 31. The journal entry on June 30, 2011, will include:
A) a $6,000 credit to Cash.
B) a $1,200 credit to Bond Premium.
C) a $58,800 debit to Interest Expense
D) a $600 credit to Bond Discount.

Question

Quizplus · Accepted Answer

The bond discount of $12,000 is amortized over 10 years, resulting in an annual amortization of $1,200. For six months, the amortization is $600, which is credited to Bond Discount.

Crosson Company Uses the Straight-Line Method of Amortization and Had