Question

Hillinger, inc. Issues $100,000 of 4% bonds on january 1, year 1. The bonds have a five-year term and pay interest semiannually on june 30 and december 31 each year. Assuming a market interest rate of 5% and an issue price of $95,624, what is the carrying value of the bonds as of june 30, year 1? use the sample amortization table as a reference to assist with your answer.

Answer 1

The carrying value of the bond till 1st June is $96,014.60.

What is the carrying value of the bond?

The carrying value is given as the value of the company's bonds in the form of a figure to be given in the company’s balance sheet at the particular date, such as year-end.

Computation:

Given,

Face value of bond= $100,000

Issue price of bond= $95,624

Interest rate of bond on Jan 1 is 4%

Interest rate of bond on June 1 is 6%

The computation of the carrying value of the bond is shown in the image attached below.

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