OnJaruary 1, 2018, statewide Sales issued $21,000 in bonds for S18.700. These ae

Question

OnJaruary 1, 2018, statewide Sales issued $21,000 in bonds for S18.700. These ae six-year bonds wth astated ne d 13% nd pay seríanu'n mtSublide Sala. usee he Immediately after the issue of the bonds, the ledger balances appeared as follows straight- line method to amortine the Bond Disoount Bonds Payable 21,000 Discount on Bonds Payable After the second interest payment on December 31, 2018, what is the balance of Discount on Bonds Payable? (Round any itermediate caloulations to two decimal places, and your nal anewor to the nearest dolar) O A debit of $2,492 O B. debit of $2,108 O C. credit of $2,300 O D. debit of $1,917

Explanation / Answer

D. debit of $ 1,917

Working:

a. Straight Line amortization of discount on bonds payable = Discount on bonds payable/Total Semi annual period = $       2,300 / 12 = $     191.67 b. Total amortization of discount on bonds payable after second interest payment = $     191.67 x 2 = $     383.33 c. Balance in Discount on Bonds Payable after second interest payment = Discount on Bonds Payable at the beginning -Amortized discount till second interest paymnet = $       2,300 - $ 383.33 = $       1,917 Discount on bonds payable has debit balance. So at the end of second interest payment, Balance of discount on bonds payable Debit of $       1,917

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