Acompany issues $500,000 of 9%, 10-year bonds dated january 1 and pay interest semiannually on june 30 and december 31 each year. the bonds are sold for $480,000, yielding a discount of $20,000. using the straight-line amortization method, the company will amortize the discount by on each semiannual interest payment.

The answer is: The company will amortize the discount by $1,000 on each semiannual interest payment.

Explanation:

Please find the below for detailed explanations and calculations:

Because at the time of issuance, the company has received $480,000 cash for the issuance of $500,000 face value of bonds, it had issued at an discount of $20,000 ( $500,00 - $480,000).

Moreover, the company uses straight-line amortization method, so this $20,000 discount on bond payable will be amortized equally through 20 interest payments of bond life ( that is, calculated as 10 years x 2 payment per year).

Thus, the amount of discount amortization recorded at each interest payment is $20,000 / 20 = $1,000.

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