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A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is...

A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2013. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2015?

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Expert Solution

Amortization table

Year

Period

Cash payment

Interest expense

Discount on Bonds payable

Carrying Value of Bond

Issued

$        197,927.74

$   9,802,072.26

2013

June 30

$             390,000.00

$            392,082.89

$             2,082.89

$   9,804,155.15

Dec 31

$             390,000.00

$            392,166.21

$             2,166.21

$   9,806,321.36

2014

June 30

$             390,000.00

$           392,252.85

$             2,252.85

$   9,808,574.21

Dec 31

$             390,000.00

$            392,342.97

$             2,342.97

$   9,810,917.18

2015

June 30

$             390,000.00

$            392,436.69

$             2,436.69

$   9,813,353.87

Dec 31

$             390,000.00

$            392,534.15

$             2,534.15

$   9,815,888.02

Answer – carrying value of bond on December 31 2015= $   9,815,888.02    or $   9,815,888

ekkarill92 answered 3 years ago
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