Equipment Rental Co. issued $90,000 of 6% bonds on January 1 at a discount of $6,821....

Equipment Rental Co. issued $90,000 of 6% bonds on January 1 at a discount of $6,821. Interest expense reported during the year totaled $5,809, while amortization amounted to $409.

book value of bonds at end of year?

Solutions

Expert Solution

In the given question, the following points to be noted:

1) Face Value of the bonds = $90,000

2) Bonds are issued at discount of $6,821

3) It means Bond Issue Price = Face Value $90,000 - Discount $6,821 = $83,179

4) This Bond Discount is amortized over the life of bond. Here life is not given in the question but amortization amount is given $409

Book Value of The Bonds at the end of year = Face Value - Unamortized Bond Discount Amount

Unamortized Bond Discount Amount = Total Bond Discount $6,821 - Amortization of Bond Discount $409 = $6,412

Book Value of The Bonds at the end of year = Face Value $90,000 - Unamortized Bond Discount Amount $6,412 = $83,588

Book Value of bonds at end of year = $83,588

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ekkarill92 answered 1 year ago

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