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On January 1, 2024, Walloon Co. issued its 10% bonds in the face amount of $3,000, which mature on January 1, 2034. The bonds were issued for $3,405 to yield 8%. Walloon uses the straight-line method of
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On January 1, 2024, Walloon Co. issued its 10% bonds in the face amount of $3,000, which mature on January 1, 2034. The bonds were issued for $3,405 to yield 8%. Walloon uses the straight-line method of amortizing the bond premium. Interest is payable annually on December 31. The 12/31/25 unamortized bond premium is approximately:

User Ivan Hreskiv
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Answer:

Unamortized Premium is $324

Step-by-step explanation:

First, we will calculate the premium amont of the bond at the time of issuance

Premium on Bond = Issuance value - Face value = $3,405 - $3,000 = $405

Using Straight-line method the premium on the bond will be amortized over the life of the bond

Amortization of Premium = Premium on Bond / Numbers of years to maturity at issuance = $405 / ( January 1, 2034 - January 1, 2024 ) = $405 / 10 = $40.5 per year

Now we will calculate the numbers of years accrued

Numbers of ears accrued = December 31, 2025 - January 1, 2024 = 2 years

Unamortized premium = Total Premium - Amortize Premium = Total Premium - ( Amortization per year x Numbers of year accrued ) = $405 - ( $40.5 x 2 years ) = $324

User Cui Mingda
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