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On January 1, Ayayai Corp. issues $4650000, 5-year, 12% bonds at 97 with interest payable on...

On January 1, Ayayai Corp. issues $4650000, 5-year, 12% bonds at 97 with interest payable on January 1. What is the carrying value of the bonds at the end of the third interest period?

$4454700

$4398900

$4566300

$4594200

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Answer #1

Issue price of bonds = 4650000*97/100 = 4510500

Discount on bonds payable = 4650000-4510500 = 139500

Annual amortization = 139500/5 = 27900

Unamortized discount at the end of third interest period = 139500-(27900*3) = 55800

Carrying value = Face value-Unamortized discount on bonds

                         = 4650000-55800

Carrying value = 4594200

So answer is d) $4594200

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