Question

Discount-Mart issues $18 million in bonds on January 1, 2021. The bonds have a eight-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 16,180,939 06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795 12/31/2021 900,000 975,108 75,108 16,326,903 06/30/2022 900,000 979,614 79,614 16,406,517 12/31/2022 900,000 984,391 84,391 16,490,908 What is the carrying value of the bonds as of December 31, 2022

Answer 1

Discount-Mart

The carrying value of the bonds as of December 31, 2022 is:

$16,490,908

Step-by-step explanation:

a) Data and Calculations:

Bonds issued = $18 million

Date of issue = Jan. 1, 2021

Bond term = 8 years

Interest payable on June 30 and December 31 each year.

b) Partial bond amortization schedule for the bonds:

Date Cash Paid Interest Expense Increase in Carrying Value

Carrying Value

01/01/2021 $ 16,180,939

06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795

12/31/2021 900,000 975,108 75,108 16,326,903

06/30/2022 900,000 979,614 79,614 16,406,517

12/31/2022 900,000 984,391 84,391 16,490,908

b) The carrying value of the bond is the net amount between the par value of $18 million and the unamortized premium or discount. It is this value that is reported on the balance sheet.