Answer:
- At the end if the first year, Weatherholt should report unamortized bond discount of
$285,500
Explanation:
The entry to record the bond issuance is as follows:
On January 1
It the moment of the bond issued the company register:
Debit $4,695,000 Cash
Debit $305,000 Discount on Bond Payable
Credit $5,000,000 Bonds Payable
Bond Discount: $305,000
At the moment of the first interest payment:
Interest Payment Stated: $450,000 = 9%*$5,000,000
Interest Market Rate 10% by Book Value Bond:
10% * $4,695,000 = $469,500
Amortization of Bond Discount: $469,500 - $450,000 = $19,500
- Debit Balance in the Account Bond Discount:
$305,000 - $19,500= $285,500
