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Homework answers / question archive / On January 1, 2009, $5,000,000, 10-year, 8% bonds were issued at $5,150,000

On January 1, 2009, $5,000,000, 10-year, 8% bonds were issued at $5,150,000

Accounting

On January 1, 2009, $5,000,000, 10-year, 8% bonds were issued at $5,150,000. Interest is paid each January 1 and July 1. If the straight-line method of amortization is used to amortize the premium, the annual amortization amount is

a. $1,250.

b. $15,000.

c. $3,333.

d. $1,500.

 

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Answer:

b .

Step-by-Step explanation

Annual Amortization amount =   $15000

 Premium on bond =Issue Price - Face value

                               $5150000-$500000= $150000    

Annual Amoritzation  = premium / No of years

                                   =$150000/10

                                   = $15000  

                       

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