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LiRa [457]
2 years ago
5

Held-to-Maturity Bond Investment On January 1, 2016, Weaver Company purchased as held-to-maturity debt securities $500,000 face

value of Park Corporation's 8% bonds for $456,200. The bonds were purchased to yield 10% interest and pay interest annually. The bonds mature on January 1, 2021. Weaver uses the effective interest method of amortization. What amount should Weaver report on its December 31, 2016, balance sheet as an investment in held-to-maturity debt securities? a. $456,200 b. $461,820 c. $466,200 d. $450,580
Business
1 answer:
yulyashka [42]2 years ago
8 0

Answer:

b. $461,820

Explanation:

The computation of the amount reported in the balance sheet is shown below:

But before that we need to find out the amortization of discount which is

= Purchased value of bond × interest rate of return - face value of bond × interest rate

= $456,200 × 10% - $500,000 × 8%

= $45,620 - $40,000

= $5,620

Now the amount reported is

= Purchased value + discount amortization

= $456,200 + $5,620

= $461,820

Hence, the option b is correct

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