Riedy purchased (on 7/1/21) $1,000,000 of HTM, 8% bonds for $904,000

Accounting Oct 07, 2020

Riedy purchased (on 7/1/21) $1,000,000 of HTM, 8% bonds for $904,000. The bonds mature on January 1, 2029; Straight-line amortization is used. The 12/31/22 bond carrying value is:

Select one:

a. $910,400

b. $916,800

c. $910,000

d. $923,200

e. $897,600

Expert Solution

Computation of 12/31/22 Bond Carrying Value:

Given,

Face Value = $1,000,000

Issue Price = $904,000

Unamortized Discount = $1,000,000-$904,000 = $96,000

Time Period (From July 1, 2021 to December 31, 2029) = 7.5 years

So,

Discount Amortized Each Period = $96,000/7.5 years = $12,800

Bond Carrying Value on 12/31/2022 = $1,000,000 - ($12,800*(7.5 years - 1.5 Years))

= $1,000,000 - $76,800

Bond Carrying Value on 12/31/2022 = $923,200

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