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Homework answers / question archive / On June 1, 2019 Adelphi Corporation issued $425,000 of 6%, 5-year bonds
On June 1, 2019 Adelphi Corporation issued $425,000 of 6%, 5-year bonds. The bonds which were issued at 97, 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.
Computation of Amount of Bond Discount or Premium that is amortized with each interest payment:
The bonds are issued at a discount at 97%
Issue price = $425,000 * 97% = $412,250
Discount on issue = $425,000 - $412,250 = $12,750
Assuming straight line method of amortization, the number of periods in which discount is to be amortized is 5*2 = 10 interest periods.
Bond Discount Amortized with Each Interest Payment = $12,750 / 10 = $1,275
