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

Accounting Mar 19, 2021

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.

Expert Solution

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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