Amortize Bond Discounts And Premiums Practice Test

A for-profit company issued $800,000 of 9% bonds payable at a premium of $24,000 on January 1, 20X1. Interest is paid annually each December 31, and the bonds mature in 6 years. The company uses the straight-line method under U.S. GAAP. Which statement correctly describes the amortization of the bond premium during 20X1?

A governmental entity (governmental activities) issued $2,000,000 of 7% bonds payable at 96 on January 1, 20X1. Interest is paid annually each December 31, and the bonds mature in 10 years. The government uses the straight-line method to amortize the bond discount for government-wide financial statements under U.S. GAAP. What is the carrying amount of the bonds at December 31, 20X1, after recording the first year’s interest and discount amortization?