On January 1, 2021, $930000, 5-year, 5% bonds, were issued for $890331

Accounting Aug 09, 2020

On January 1, 2021, $930000, 5-year, 5% bonds, were issued for $890331. The interest rate in effect when the bonds were issued was 6%. Interest is paid semi-annually on January 1 and July 1. What would be the amount of discount amortized on January 1, 2022? (Round intermediate calculations to 5 decimal places.)

Expert Solution

Computation of the amount of discount amortized on January 1, 2022:-

Amount of discount amortized = Semiannual interest payment - Semiannual cash payment

= ($890,331 * 6% / 2) - ($930,000 * 5% / 2)

= $26,709.93000 - $23,250.00000

= $3,459.93

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