Question

The current carrying value of Covington's $800,000 face value bonds is $782,300. If the bonds are retired at 101, what would be the amount Covington would pay its bondholders?

A: $17,700
B: $790,123
C: $800,000
D: $808,000

Answer 1

Covington would pay its bondholders $808,000 if the bonds are retired at 101, which is 101% of the bond's face value.

Step-by-step explanation:

If the current carrying value of Covington's bonds is $800,000 and they are retired at 101, this means that the company will pay 101% of the face value of the bonds to the bondholders. Therefore, the calculation to determine the amount payable would be $800,000 (the face value) × 101% (the retirement percentage), which equals $808,000. This is the amount that Covington would pay its bondholders if the bonds are retired at 101.