Answer:
Bond receivable - Ott Inc 200,000
Premium on B.R Ott Inc 14,400
Interest receivables 10,000
Net: 224,400
Explanation:
As Park Co uses straight line method, we don't have to solve for the present value of the bond we directly label the difference between cost and face value as premium or discount accordingly. Premium when above and discount when lower.
accrued interest:
200 bonds x $1,000 each x 10% x 3/12 = 5,000
220,0000 cost - 5,000 interest - 200,000 face value = 15,000 bond premium
Balance at December year 15:
the interest payable will be for the entire period:
200,000 x 10% / 2 = 10,000
the premium will be amortized for 3 month.
and it has outstanding 75 month to mature from October 1st
15,000 x 3 / 75 months = 600
carrying value 15,000 - 600 = 14,400
