Question

E-Tech initiatives limited plans to issue 730000, 10-year, 6.50 percent bonds. Interest payable annually on december 31. all of the bonds will be issued on january 1 2019. show how the bonds would be reported on the january 2 2019, balance sheet if they are issued at 105

Answer 1

The correct answer is $766,500.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Bonds payable = $730,000

Issued at = 105%

So, it means that the premium on payable is 5% of the bonds payable amount

So, Premium on Bonds payable = $730,000 × 5% = $36,500

So, we can calculate the carrying value by using following formula:

Carrying value = Bonds payable + Premium on Bonds payable

By putting the value, we get

Carrying value = $730,000 + $36,500

= $766,500