Question

E-Tech Initiatives Limited plans to issue $550,000, 10-year, 3 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 95. (Deductions should be indicated by a minus sign. )
E-TECH INITIATIVES LIMITED

Balance Sheet (partial)

As of January 2, 2019

Carrying Value

Answer 1

This is how the bonds issued by E-Tech Initiatives Limited on January 1, 2019, will be shown on its balance sheet on January 2, 2019:

E-TECH INITIATIVES LIMITED

Balance Sheet (partial)

As of January 2, 2019

Long-term Liabilities:

Bonds Payable (Carrying Value)

Face value = $550,000

Discounts          (27,500) $522,500

How is the carrying value of bonds payable shown on the balance sheet?

The carrying value of this bond equals its par or face value ($550,000) plus any unamortized premiums or less unamortized discounts ($27,500).

Thus, the net amount between the par value and the premium or discount is called the carrying value which is reported on the balance sheet.

Data and Calculations:

Face value = $550,000

Maturity period = 10 years

Interest on bonds = 3% annually

Issue value = 95

Price = $522,500 ($550,000 x 95%)

Discount = $27,500 ($550,000 x 522,500)

Learn more about the carrying value of bonds at brainly.com/question/24307706