Question

In: Accounting

What is the maturity value of the bonds?

Question: Analyzing, journalizing, and reporting bond transactions

Danny’s Hamburgers issued 6%, 10-year bonds payable at 90 on December 31, 2018.

At December 31, 2020, Danny reported the bonds payable as follows:

Long-term Liabilities:

Bonds Payable $ 600,000

Less: Discount on Bonds Payable (48,000) $ 552,000

Danny’s pays semiannual interest each June 30 and December 31.

Requirements

1. Answer the following questions about Danny’s bonds payable:

a. What is the maturity value of the bonds?

b. What is the carrying amount of the bonds at December 31, 2020?

c. What is the semiannual cash interest payment on the bonds?

d. How much interest expense should the company record each year?

Expert Solution

Step 1: Definition of carrying amount

The amount at which the bonds are purchased is known as the carrying amount of the bonds.

Step 2: Maturity value of the bonds

The maturity value of the bonds is $600,000.

Step 3: Carrying amount of the bonds

The carrying amount of the bonds is $552,000.

Step 4: Semi-annual interest payment

Step 5: Interest expense record each year

The company has to record $21,000 as an interest expense.

The amount at which the bonds are purchased is known as the carrying amount of the bonds.

Sahil Dangi answered 2 years ago

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