Question

Riedy purchased (on 1/1/21) $1,000,000 of HTM, 8% bonds for $904,000. The bonds mature on January 1, 2029; Straight-line amortization is used. The 12/31/21 bond carrying value is:

Answer 1

Answer:

The 12/31/21 bond carrying value is $916,000

Explanation:

The discount on bonds payable is the face value of $1000,000 minus the cash proceeds received from the bond issuance.

Discount on bonds payable=$1,000,000-$904,000=$96000

annual bond discount amortization=$96,000/8=$12000

annual coupon payment=$1,000,000*8%=$80,000

The carrying value of the bond as at 12/31/21=cash proceeds+bond discount amortization

The carrying value of the bond as at 12/31/21=$904,000+$12000=$916000