Question

On January 1, 2019, Shay Company issues $400,000 of 10%, 12-year bonds. The bonds sell for $391,000. Six years later, on January 1, 2025, Shay retires these bonds by buying them on the open market for $419,000. All interest is accounted for and paid through December 31, 2024, the day before the purchase. The straight-line method is used to amortize any bond discount. 1. What is the amount of the discount on the bonds at issuance

Answer 1

$9,000

Step-by-step explanation:

The computation of the amount of the discount on the bonds at issuance is shown below:

= Par value of the bond - issued price of the bond

= $400,000 - $391,000

= $9,000

By deducting the issued price of the bond from the par value of the bond we can get the discount amount on issuance of the bond and the same is applied above