Question

On January 1, 2017, Walker Sales issued $30,000 in bonds for $23,300. These are eight-year bonds with a stated rate of 11%, and pay semiannual interest. Walker Sales uses the straight-line method to amortize the bond discount. After the second interest payment on December 31, 2017, what is the bond carrying amount

Answer 1

Walker Sales

The bond carrying amount on December 31, 2017 is:

= $30,838.

Step-by-step explanation:

a) Data and Calculations;

Face value of bonds = $30,000

Proceeds from the bonds issue on January 1, 2017 = $23,300

Bonds discount = $6,700 ($30,000 - $23,300)

Stated interest rate = 11%

Semiannual payment = $1,650 (30,000 * 5.5%)

Semi-annual amortization of discount = $419 ($6,700/16)

June 30, 2017:

Interest expense $2,069

Cash payment 1,650

Amortization of discount = $419

Fair value of bonds = $30,419

December 31, 2017:

Interest expense $2,069

Cash payment 1,650

Amortization of discount = $419

Fair value of bonds = $30,838