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On June 1, 2019 Adelphi Corporation issued $240,000 of 6%, 5-year bonds.  The bonds which were issued...

On June 1, 2019 Adelphi Corporation issued $240,000 of 6%, 5-year bonds.  The bonds which were issued at 99, pay interest on January 1 and June 1. Use this information to calculate the amount of bond discount or premium that is amortized with each interest payment. If this is discount amortization enter as a positive number. If this is premium amortization enter as a negative number.

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Answer #1

Par value of bonds = $240,000

Issue price of bonds = 99

Cash receipt from issue of bonds = Par value of bonds x Issue price of bonds

= 240,000 x 99%

= 237,600

Discount on bonds payable = Par value of bonds - Cash receipt from issue of bonds

= 240,000 - 237,600

= $2,400

Life of bonds = 5 year

Interest is payable semi annually.

Discount on bonds payable to be amortized semi annually = Discount on bonds payable/Semi annual interest period

= 2,400/10

= $240

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