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On January 1,2022 , Pipestone Corporation issued a five-year,
$40,000,7%
bond. The interest is payable annually each December 31 . The issue price was
$38,404
based on an
8%
effective interest rate. Pipestone uses the effective-interest amortization method. The December 31, 2023 book value after the December 31,2023 interest payment was made is closest to: Multiple Choice
$38,380. $38,404. $38,970.

Respuesta :

Tundexi

The book value after the December 31, 2020 interest payment was made is closest to $38,676.32. The Option D is correct.

How to compute the book value for December 31, 2023?

The First step is to calculate the Interest paid:

= $40,000 * 7%

= $2,800

The Second step is to calculate the Interest expense:

= $38,404 * 8%

= $3,072.32

The Third step is to calculate the Discount amortization

= $3,072.32 - $2,800

= $272.32

Book value at the end of December 31, 2023:

= $38,404 + $272.32

= $38,676.32

Therefore, the book value after the December 31, 2020 interest payment was made is closest to $38,676.32.

Full Option" $38,380. $38,404. $38,970.  $38,676.32"

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