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On November 1, 2015, Davis Company issued $30,000, five-year, 8% bonds for $29,560. The bonds were...

On November 1, 2015, Davis Company issued $30,000, five-year, 8% bonds for $29,560. The bonds were dated November 1, 2015, and interest is payable each on May 1 and November 1. Davis uses the straight-line method of amortization. How much is the amount of discount amortization on each semi-annual interest date?

$440.

$44.

$220.

$88.

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Homework Answers

Answer #1

Answer is $44

Face Value of Bonds = $30,000
Proceed from Issue = $29,560

Discount on Issue = Face Value of Bonds - Proceed from Issue
Discount on Issue = $30,000 - $29,560
Discount on Issue = $440

Time to Maturity = 5 years
Semiannual Period to Maturity = 10

Amortization of Discount on each semiannual interest date = Discount on Issue / Semiannual Period to Maturity
Amortization of Discount on each semiannual interest date = $440 / 10
Amortization of Discount on each semiannual interest date = $44

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