Bonds with a stated interest rate of 9% and a face value totaling $625,000 were issued...

Bonds with a stated interest rate of 9% and a face value totaling $625,000 were issued for $637,500 on January 1, 2018, when the market interest rate was 8%. The company uses effective-interest bond amortization.

Required:

Determine the carrying value of the bonds at December 31, 2019. (Round your answer to nearest whole dollar.)

Expert Solution

Carrying value of the bonds at December 31, 2019 = $ 626,580

Working:

Schedule of Interest Expense and Bond Premium Amortization
Effective Interest Method
Date	Credit Cash	Debit Interest Expense	Debit Bonds Payable	Bonds Carrying Amount/Net Book Value
1/1/2018				$ 637,500
31/12/18	$ 56,250	$ 51,000	$ 5,250	$ 632,250
31/12/19	$ 56,250	$ 50,580	$ 5,670	$ 626,580

ekkarill92 answered 1 year ago

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