Question

On January 1, Patterson Inc. issued $4,000,000, 9% bonds for $3,755,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Patterson uses the effective-interest method of amortizing bond discount. At the end of the first year, Patterson should report unamortized bond discount of

Answer 1

Answer:

$229,500

Explanation:

Calculation for unamortized bond discount to be reported

First step is to calculate the bonds amount

Bond s=($3,755,000 × .10) - ($4,000,000 × .09)

Bonds=$375,500-$360,000

Bondsman = $15,500

Last step is to calculate the unamortized bond discount

Unamortized bond discount=($4,000,000 - $3,755,000) - $15,500

Unamortized bond discount=$245,000-$15,500

Unamortized bond discount= $229,500

Therefore Patterson should report unamortized bond discount of $229,500