On January 1, a company issued and sold a $330,000, 4%, 10-year bond payable, and received...

On January 1, a company issued and sold a $330,000, 4%, 10-year bond payable, and received proceeds of $323,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the second interest payment is:

Expert Solution

Answer:

The carrying value of the bonds immediately after the second interest payment is: $323,700

Working:

Date	Interest payment (330,000*4%/2)	Interest expenses	Amortization of Bond discount (7,000/20)	Debit balance in bond discount payable A/c	Credit balance in bond payable A/c	Carrying value of bonds
0				$ 7,000	$ 330,000	$ 323,000
June.30	$ 6,600	$ 6,950	$ 350	6,650	$ 330,000	323,350
Dec.31	$ 6,600	$ 6,950	$ 350	6,300	$ 330,000	323,700
June.30	$ 6,600	$ 6,950	$ 350	5,950	$ 330,000	324,050
Dec.31	$ 6,600	$ 6,950	$ 350	5,600	$ 330,000	324,400
June.30	$ 6,600	$ 6,950	$ 350	5,250	$ 330,000	324,750

ekkarill92 answered 1 year ago

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