Question

In: Accounting

On January 1, 2023, Ajax Ltd. issued $10 million in bonds. Thebonds have a 10-year...

On January 1, 2023, Ajax Ltd. issued $10 million in bonds. The bonds have a 10-year term, 6% annual market interest rate, and pay interest semiannually. The seventeenth semiannual payment of $400,000 consisted of $311,15, interest and $88,849 premium amortization, after which the carrying amount was reduced to $10,282,861. What is the carrying value of the bonds after the eighteenth semiannual payment of $400,000?

Question 4 options:

	$10,000,000
	$10,065,889
	$10,191,347
	This problem cannot be solved with the information given.

Expert Solution

Carrying value of bonds after 17th semi annual payment = $10,282,861

Market interest rate = 6%

Interest expense for 18th payment period = Carrying value of bonds after 17th semi annual payment x Market interest rate x 6/12

= 10,282,861 x 6% x 6/12

= $308,486

Semi annual interest payment = $400,000

Amortization of bond premium in 18th semi annual payment = Semi annual interest payment- Interest expense for 18th payment period

= 400,000-308,486

= $91,514

Carrying value of the bonds after the eighteenth semiannual payment = Carrying value of bonds after 17th semi annual payment - Amortization of bond premium in 18th semi annual payment

= 10,282,861-91,514

= $10,191,347

Third option is correct.

ekkarill92 answered 2 years ago

On January 1, 2023, Ajax Ltd. issued $10 million in bonds. The bonds have a 10-year...

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