Question

n January​ 1, 2018, Waller Sales issued $ 20 comma 000 in bonds for $ 18 comma 300. These are eightminusyear bonds with a stated rate of 12​%, and pay semiannual interest. Waller Sales uses the straightminusline method to amortize the bond discount. After the second interest payment on December​ 31, 2018, what is the bond carrying​ amount?

Answer 1

Answer:

$18,106.25

Explanation:

For computing the carrying value of the bonds , first we have to determine the discount amortization for 8 years which are shown below:

= (Issued amount - proceeds from the bonds) ÷ time period

= ($20,000 - $18,300) ÷ 8 years × 2 years

= $106.25

Now the carrying value would be

= Proceeds from the bonds + discount amortization for 8 years  

= $18,000 + $106.25

= $18,106.25

Since the time period is 8 which are paid in semi-annual so we double the time period