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?

Question

Gina Collins

Business

19 May, 23:01

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?

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Chaim Alvarez · Answer 1

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