On January 1, 2020, Overwater Experiences issues a bond due in 5 years with a coupon/stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually on 6/30 and 12/31. The market rate for this type of bond is 7%. The bond sold for $95,842. What will be the carrying value of the bond on December 31, 2020?
dicount on bonds = face value - issue price
= 100000 - 95842
= 4158 $
|Date||int on bonds (market rate) (7%*(bookvalue of bonds)* 6/12)||Interest on bonds (cuponrate) (100000*6%* 6/12)||Amortization of bonds Discount||Carrying value of bonds||balance in bod Discounnt account|
|1/1/2020||(interest expense)||CREDIT (Cash paid )||crebit (Discount on bonds)||95842||4158|
THEREFORE Carrying value of bonds = 96563 $
Carrying value of bonds = book value + amortization for the period
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