accrual basis financial statements every June 30 and December 31. On 1/1/2001 the company issued bonds to the public. The bonds are due at the end of 20 years, on 12/31/2020. The face value of the bonds is $100,000 and the annual coupon rate is 12%. Coupon payments are made to the bondholders semi-annually every June 30 and December 31, beginning 6/30/2001. The bonds were issued to yield 10% annual rate. You can use our present value tables presented in class, Tables 2 and 4. What is the book value of Bonds Payable on 1/1/2001

Respuesta :

Answer:

$85,553

Explanation:

January 1, 2021

Dr Cash 114.963

    Cr Bonds payable 100,000

    Cr Premium on bonds payable 14,963

market price:

$100,000 / (1 + 5%)⁴⁰ = $14,205

$6,000 x 19.793 (PVIFA, 5%, 40 periods) = $100,758

market price = $114,963

amortization of bond premium = ($114,963 x 5%) - $6,000 = -$252

amortization of bond premium = ($114,711 x 5%) - $6,000 = -$264

carrying value = $100,000 - $14,447 = $85,553