In: Accounting
A company issues $15900000, 5.8%, 20-year bonds to yield 6% on January 1, 2016. Interest is paid on June 30 and December 31. The proceeds from the bonds are $15532475. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018
a. |
$15592634 |
b. |
$15795428 |
c. |
$15565336 |
d. $15587604 |
Bonds Par Value = | $ 1,59,00,000 | ||
Less: Proceeds From sale of Bonds | $ 1,55,32,475 | ||
Difference | $ 3,67,525.00 | ||
This difference will amortize over the 20 years in equla installment | |||
Equal installment = | $ 3,67,525.00 | ||
Divide By | "/"By | ||
Years = | $ 20.00 | Years | |
Amortization amount per year = | $ 18,376.25 | ||
Till the December 31, 2018 amount amortize = | $ 55,128.75 | ||
So Carrying value of the Bonds = Issue Value + Amortized Amount | |||
Issue Value = | $ 1,55,32,475 | ||
Add: Amortize Value in 3 years | $ 55,128.75 | ||
Carrying Value | $ 1,55,87,603.75 | ||
Carrying Value (Round off) | $ 1,55,87,604 | ||
Answer = Option D = | $ 1,55,87,604 | ||