Question

On October 1, 2021, Cullumber Company purchased to hold to maturity, 4100, $1000, 10% bonds for $4010000 which includes $61000 accrued interest. The bonds, which mature on February 1, 2030, pay interest semiannually on February 1 and August 1. Cullumber uses the straight-line method of amortization. The bonds should be reported in the December 31, 2021 balance sheet at a carrying value of $3949000. $3953530. $4010000. $4100000.

Answer 1

Cullumber Company

The bonds should be reported in the December 31, 2021 balance sheet at a carrying value of:

= $3,949,000

Step-by-step explanation:

a) Data and Calculations:

October 1, 2021:

Face value of bonds = $4,100,000

Cash payment for bonds = $4,010,000

Accrued interest on bonds = $61,000

Unamortized Bonds Discount = $151,000 ($4,100,000 - $4,010,000 + $61,000)

Carrying value = Face Value - Unamortized discounts

= $3,949,000 ($4,100,000 - $151,000) or ($4,010,000 - $61,000)

Amortization of discount using the straight-line method on March 31:

Interest Revenue = $205,000

Semi-annual amortized discount = $7,550 ($151,000/20)