**Answer:**

Mabry Corporation

Using the effective interest method, the bond discount should be reduced for the 6 months ended December 31, 2018 by:

= d. $90,000

**Explanation:**

a) Data and Calculations:

Face value of bonds issued = $15 million

Issue price of the bonds = 13.8 million

Bonds discounts = $1.2 million

Coupon rate of interest = 8%

Effective interest rate = 10%

Interest payment = semi-annually on December 31 and July 1

December 31, 2018:

Interest payment = $600,000 ($15 million * 4%)

Interest expense = $690,000 ($13.8 million * 5%)

Amortization of discounts = $90,000 ($690,000 - $600,000)

Fair value of bonds = $13.89million ($13.8m + $90,000)