On January 1, 2017, Shay issues $300,000 of 10%, 15-year bonds at a price of 97.75. Six years later, on January 1, 2023, Shay retires 20% of these bonds by buying them on the open market at 105.25. All interest is accounted for and paid through December 31, 2022, the day before the purchase. The straight-line method is used to amortize any bond discount.

What is the amount of the discount on the bonds at January 1, 2013?

Question

Business

Frauline

13 November, 00:42

On January 1, 2017, Shay issues $300,000 of 10%, 15-year bonds at a price of 97.75. Six years later, on January 1, 2023, Shay retires 20% of these bonds by buying them on the open market at 105.25. All interest is accounted for and paid through December 31, 2022, the day before the purchase. The straight-line method is used to amortize any bond discount.

What is the amount of the discount on the bonds at January 1, 2013?

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Answers (1)

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Alan Grant · Answer 1

The correct answer is $6,750.

Explanation:

According to the scenario, the given data are as follows:

Bonds = $300,000

Price of bonds = 97.75

So, we can calculate the discount on the bonds by using following formula:

Discount on bonds = $300,000 - ($300,000 * 97.75%)

= $300,000 - $293,250

= $6,750

Hence, the amount of the discount on the bonds at January 1, 2013 is $6,750.