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Bonds with a $3,679 discount and a five-year term are amortized using the straight-line method. What is the annual discount amortization (rounded)?
A$3,679
B$1,840
C$736
D$184
Answer & Solution
Correct answer: C. $736
1. Straight-line amortization divides the discount evenly over the bond term.
2. Divide by the number of years: \$3{,}679 \div 5 = \$735.8.
3. Rounded to the nearest dollar, this is $736 per year.
4. The entry debits Interest Expense $736 and credits Discount on Bonds Payable $736.
5. Option A spreads nothing over time; option B halves rather than fifths the amount.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Amortizing the discount", p.227_
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