Question

# Garland Company received proceeds of \$178600 on 10-year, 6% bonds issued on January 1, 2018. The...

Garland Company received proceeds of \$178600 on 10-year, 6% bonds issued on January 1, 2018. The bonds had a face value of \$190000, pay interest annually on January 1, and have a call price of 101. Garland uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2020? \$179740 \$190000 \$180880 \$187492

Face Value of Bonds = \$190,000
Proceeds from issuance of bonds = \$178,600

Discount on Bonds Payable = Face Value of Bonds - Proceeds from issuance of bonds
Discount on Bonds Payable = \$190,000 - \$178,600
Discount on Bonds Payable = \$11,400

Life of Bonds = 10 years

Discount on Bonds to be amortized annually = Discount on Bonds Payable on issuance / Life of Bonds
Discount on Bonds to be amortized annually = \$11,400 / 10
Discount on Bonds to be amortized annually = \$1,140

Discount amortized = Discount on Bonds to be amortized annually * Life expired
Discount amortized = \$1,140 * 2
Discount amortized = \$2,280

Carrying Value of Bonds = Issue Price + Discount amortized
Carrying Value of Bonds = \$178,600 + \$2,280
Carrying Value of Bonds = \$180,880