Question

Hinton Company issued $ 325, 000 $325,000​, 6​%, ten​-year bonds for 112​, with interest paid annually. Assuming​ straight-line amortization, what is the carrying value of the bonds after one​ year?

A. $367,900

B. $362,050

C. $360,100

D. $364,000

Bonds with an​ 8% stated interest rate were issued when the market rate of interest was​ 5%. This bond was issued at

A. premium

B. par value

C. discount

D. face value

Bolton Corporation issued $ 2,500,000 $2,500,000​, 5​-year, 5​% bonds for $ 2,350, 000 $2,350,000 on January​ 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the​ straight-line method of amortization. Bolton​'s fiscal year ends on December 31. The amount of discount amortization on July​ 1, 2019​, would be

A. $30,000

B. $150,000

C. $125,000

D. $15,000

Answer 1

1) Carrying value of bonds = 325000*1.12 = 364000

Premium amortization per year = (364000-325000)/10 = 3900

Carrying value after one year = 364000-3900 = 360100

So answer is c) $360100

2) Bonds with an​ 8% stated interest rate were issued when the market rate of interest was​ 5%. This bond was issued at

So answer is a) Premium

3) The amount of discount amortization on July​ 1, 2019​, would be

Discount = 2500000-2350000 = 150000

Semiannual discount amortization = 150000/10 = 15000

So answer is d) $15000