In: Finance
Discount-Mart issues $10 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
Date | Cash Paid | Interest Expense | Increase in Carrying Value | Carrying Value | ||||||||
01/01/2021 | $ | 8,640,967 | ||||||||||
06/30/2021 | $ | 300,000 | $ | 345,639 | $ | 45,639 | 8,686,606 | |||||
12/31/2021 | 300,000 | 347,464 | 47,464 | 8,734,070 | ||||||||
06/30/2022 | 300,000 | 349,363 | 49,363 | 8,783,433 | ||||||||
12/31/2022 | 300,000 | 351,337 | 51,337 | 8,834,770 | ||||||||
What is the carrying value of the bonds as of December 31,
2022?
Answer: Carrying value of the bonds as of December 31, 2022 = $8,834,770
Carrying value at any point of time [for bonds issued on discount] = Face value of bonds payable-Unamortized discount on bonds payable.
For bonds issued at permium, Carrying value at any point of time = Face value of bonds payable+Unamortized premium on bonds payable.