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On January 1, $5,000,000, 10-year, 10% bonds were issued at $5,200,000. Interest is paid annually each January 1. The straight-line method of amortization is used to amortize the premium. How much premium is amortized at the end of the first year?

Respuesta :

Karabo99

Answer:

$20,000 premium is amortized at the end of the first year.

Explanation:

Straight line amortization:

premium amortized = Premium / number of years

                                 = ($5,200,000 - $5,000,000) / 10 years

                                 = $200,000 premium / 10 years

                                 = $20,000

Therefore, $20,000 premium is amortized at the end of the first year.