The Cinci Company issues $100,000, 10% bonds at 103 on April 1, 2020. The bonds are...

The Cinci Company issues $100,000, 10% bonds at 103 on April 1, 2020. The bonds are dated January 1, 2020 and mature six years from that date. Straight-line amortization is used. Interest is paid annually each December 31. Compute the bond carrying value as of December 31, 2023.

Answer

$_______________

Solutions

Expert Solution

Answer:
Total amortization period = 6 Years = 6 x 12 = 72 months
Number of months of Amortization = 9 months in 2020 + ( 3 x 12 months ) till 2023 = 45 months

Premium on bonds payable = Issue Price (-) Face Value = ($ 100,000 x 103% ) (-) $ 100,000 = $ 103,000 (-) $ 100,000 = $ 3,000

Unamortized premium = Premium on bonds payable (-) Amortized premium = $ 3,000 (-) [ $ 3,000 x 45 / 72] = $ 3,000 (-) $ 1,875 = $ 1,125

Carrying value on December 31,2023 = $ 100,000 + $ 1,125	$ 101,125

ekkarill92 answered 1 year ago

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