Discount Amortization On the first day of the fiscal year, a company issues a $1,400,000, 8%,...

Discount Amortization

On the first day of the fiscal year, a company issues a $1,400,000, 8%, 4-year bond that pays semiannual interest of $56,000 ($1,400,000 × 8% × ½), receiving cash of $1,266,974.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Solutions

Expert Solution

Bond is a fixed income security in which issuer promises to pay a series of interest payment and to repay the principle on maturity to the investor.

In straight line amortization, the premium received or discount given on issue of bond is amortized over the bond period maturity on straight line basis. Formula is (Discount / Premium Amount) divided by bond period.

ekkarill92 answered 1 year ago

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