Question

On January 1, 2017, Taggart Sales issued $18.000 in bonds for $18,800. These are eight - year bonds with a stated iterest rate of 9% that pay semiannual interest. Taggart Sales uses the staight - line method to amortize the bond premium. After the first Interest payment on June 30, 2017, what is the bond carrying amount? (Round your intermediate answers to the nearest dollar.)

A) $18,750
B) $18,800
C) $18,000
D) $18,050

Answer 1

Step-by-step explanation:

Face Value of Bonds = $18,000

Issue Value of Bonds = $18,800

Premium on Bonds = Issue Value of Bonds - Face Value of Bonds

Premium on Bonds = $18,800- $18,000

Premium on Bonds = $800

Time to Maturity = 8 years

Semiannual Period = 16

Semiannual Amortization of Premium = Premium on Bonds / Semiannual Period

Semiannual Amortization of Premium = $800/ 16

Semiannual Amortization of Premium = $50

Carrying Value = Issue Value of Bonds - Semiannual Amortization of Premium

Carrying Value = $18,800- $50

Carrying Value = $18,750

So the correct answer is A) 18,750