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The Impala Company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on 1/1/16. Interest is paid on June 30 and December 31. The bonds sold for $4,901,036. Using straight-line amortization, compute the 12/31/18 carrying value of the bonds.

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jepessoa

Answer:

carrying value at the end of 2018 = $4,915,880.60

Explanation:

the journal entry to record the sales of the bonds

Dr Cash 4,901,036

Dr Discount on bonds payable 98,964

    Cr Bonds payable 5,000,000

Amortization of bond discount per year = $98,964 / 20 years = $4,948.20

Accumulated amortization for the first 3 years (2016, 2017, 2018) = $14,844.60

carrying value at the end of 2018 = $4,901,036 + $14,844.60 = $4,915,880.60

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