Question

On January​ 1, 2018, Westside Sales issued $ 20 comma 000 in bonds for $ 21 comma 800. These are eightminusyear bonds with a stated interest rate of 10​% that pay semiannual interest. Westside Sales uses the straightminusline method to amortize the bond premium. After the first interest payment on June​ 30, 2018, what is the bond carrying​ amount? (Round your intermediate answers to the nearest​ dollar.)

Answer 1

$21,687.5

Step-by-step explanation:

Premium on bonds payable = $21,800 - $20,000 = $1,800

Interest payments = 8 years X 2 semiannual interest payments per year = 16 payments

Premium ammortisation = $1,800 / 16 = $112.5

Carrying value of the bond = $21,800 - $112.5 = $21,687.5