Question

The Impala Company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on 1/1/16. Interest is paid on June 30 and December 31. The bonds sold for $4,901,036. Using straight-line amortization, compute the 12/31/18 carrying value of the bonds.

Answer 1

carrying value at the end of 2018 = $4,915,880.60

Step-by-step explanation:

the journal entry to record the sales of the bonds

Dr Cash 4,901,036

Dr Discount on bonds payable 98,964

Cr Bonds payable 5,000,000

Amortization of bond discount per year = $98,964 / 20 years = $4,948.20

Accumulated amortization for the first 3 years (2016, 2017, 2018) = $14,844.60

carrying value at the end of 2018 = $4,901,036 + $14,844.60 = $4,915,880.60