Question

JT Engineering holds 400 RL Enterprises bonds. The bonds pay $2,000 interest each January and will mature on January 1, 2021. The bonds are classified as available-for-sale and JT sells them on October 1, 2020. If the bond discount amortization for a year was $890, how should JT determine the 2020 discount amortization for the bonds?

Answer 1

Answer:

(9/12*890)

Explanation:

The 9/12 would come from the bond not being sold until October (the 9th month). The bond has 3 more months until maturity. We know the bond discount amortization for a year is $890, so multiplying that by 9/12 will give the 2020 discount amortization.