Question

On January​ 1, 2017, Walker Sales issued​ $19,000 in bonds for​ $14,300. These are​ eight-year bonds with a stated rate of​ 13%, and pay semiannual interest. Walker Sales uses the​ straight-line method to amortize the bond discount. After the second interest payment on December​ 31, 2017, what is the bond carrying​ amount? (Round your intermediate answers to the nearest​ cent, and your final answer to the nearest​ dollar.)

Answer 1

Answer:

$14,887.5

Explanation:

Carrying Value of the bond is the net of Face value and any amortised discount on the bond.

Face Value of the bond = $19,000

Issuance Value = $14,300

Discount Value = $19,000 - $14,300 = $4,700

This Discount will be amortized over the bond's life until the maturity on straight line basis.

Amortization in each period = $4,700 / (8x2) = $293.75 semiannually

Until December 31, 2017 two payment have been made and $587.5 is amortized in the two semiannual periods.

Un-amortized Discount = $4,700 - $587.5 = $4,112.5

Carrying value of the bond  = Face value - Un-amortized Discount = $19,000 - $4,112.5 = $14,887.5