Question

Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds: Date of bonds: January 1, 2018 Maturity amount and date: $420,000 due in 10 years (December 31, 2027) Interest: 10.0 percent per year payable each December 31 Date issued: January 1, 2018

Required: For each of the three independent cases that follow provide the following amounts to be reported on the January 1, 2018, financial statements immediately after the bonds were issued: (Deductions should be indicated by a minus sign.) Case A (issued at 100) Case B (at 96 Casec (at 104) January 1, 2018-Financial Statements: a. Bonds payable b. Unamortized premium (discount) c. Carrying value

Answer 1

Answer:

The following amounts to be reported on the January 1, 2018 is shown below:-

Explanation:

January 1, 2018                 Case A            Case B          Case C

Financial Statements (issued at 100)     (at 96)          (at 104)

a. Bonds payable             $420,000       $420,000     $420,000

b. Unamortized

Premium (discount)              0                   $16,800       $16,800

c. Carrying value              $420,000     $403,200      $403,200

Working Note

For Case B Unamortized Premium (discount)

=  ($420,000 - ($420,000 ÷ 100 ×96))  = $16,800

For Case C Unamortized Premium (discount)

($420,000 - ($420,000 ÷ 100 ×104))  = $16,800