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A five-year bond issued at a $60,000 premium amortizes $1,000 per month. If the bond is issued on April 1, what premium amortization is recorded in the December 31 adjusting entry of that first year?
A$12,000
B$3,000
C$9,000
D$60,000
Answer & Solution
Correct answer: C. $9,000
1. The premium amortizes at $1,000 per month.
2. From April 1 to December 31 the bond is held 9 months.
3. Amortization for the partial year: \$1{,}000 \times 9 = \$9{,}000.
4. Option A ($12,000) is a full year; only 9 months elapsed in the issue year.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Partial Years", p.237_
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