Question

On January 2, 20X4, West Co. issued 9% bonds in the amount of $500,000, which mature on January 2, 20X24. The bonds were issued for $469,500 to yield 10%. Interest is payable annually on December 31. West uses the interest method of amortizing bond discount. In its June 30, 20X4, balance sheet, what amount should West report as bonds payable?

Answer 1

$470,425

Step-by-step explanation:

The computation of the amount reported as bond payable is shown below:

Particulars Interest at 4.5% Interest at 5% Amortized UnAmortized CV

discount discount

Starting value $30,500 $469,500

($500,000 - $469,500)

June 30 $22,500 $23,475 $975 $29,525 $470,425

($500,000 × 4.5%) ($469500 × 5%)

The six months rate would be the half of the rates given in the question