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My question: Where does the $5000 discount come from? If a $100,000, 4-year bond at 12%...

My question: Where does the $5000 discount come from?

If a $100,000, 4-year bond at 12% compounded semiannually is sold on January 1, 19X1 at 95, the entries for the
interest and discount amortization will be made on June 30 and December 31, as follows:
June 30 Interest Expense 6,000
Cash 6,000
$100,000 × 12% × 12
.
Interest Expense 625
Bond Discount 625
$5,000 discount ÷ 4 × 12
.
Dec. 31 Same entries as on June 30.

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Answer #1

the bonds were issued at 95 on january 1.

which means that they received $100,000*95% =.$95,000

so the discount on issue of bonds = $100,000 face value - 95,000 amount received.

=>$5,000.

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