A company issues $15900000, 5.8%, 20-year bonds to yield 6% on January 1, 2016. Interest is...

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

$15592634

$15795428

$15565336

d. $15587604

Solutions

Expert Solution




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

ekkarill92 answered 1 year ago

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