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On January 1, 2018, Solo Inc. issued 1,600 of its 8%, $1,000 bonds at 98.3. Interest...

On January 1, 2018, Solo Inc. issued 1,600 of its 8%, $1,000 bonds at 98.3. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2028. Solo paid $54,000 in bond issue costs. Solo uses straight-line amortization. What is the carrying value of the bonds reported in the December 31, 2018, balance sheet? Multiple Choice A. $1,526,920. B. $2,560,000. C. $2,614,000. D. $1,595,520.

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Answer #1

Correct Answer is (A): $1526920

Bond issue price = 1600*$1000* 98.3% = $1,5,72,800
Discount on issue of bond = $1,600,000 - $1,572,800 = $27,200
Bond issue cost = $54,000
Amortization of disount for 2018 = $27200 / 10 = $2720
Amortization of issue cost for 2018 = $54,000 / 10 = $5400
Unamortized discount at the end of 2018 = $27200 - $2720 = $24480
Unamortized issue cost at the end of 2018 = $54000 - $5,400 = $48600
Carrying value of bond reported in December 31, 2018 = Face value of bond - Unamortized discount - Unamortized issue cost
= $1,600,000 - $24480 - $48600 = $1,526920
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