Review Test Test 3 Chapters 8 9 12 Close Score 0 of 1pt 1201

Review Test: Test 3 Chapters 8, 9, 12 Close Score: 0 of 1pt 120120 ? Test Score: 85%, 17 of 20 pt QC12-5 (similar to) bonds payable outst and ng These bonds had a discount of $53,000 at issuancc, which was 10 ycars ago. The company uscs the straight-line amort zation method. The current carrying amount of these bonds Emily Austin FitnessS Gym has 5900,000 of 20-ycar payable is XA. $837,000 B S188500 $931,500 D. $900,000

Solution

The Answer is “B. $868,500”

Face Value of the Bond = $900,000

Issue price of the Bond

= Face Value of the Bond – Total Discount on Issue of Bond

= $900,000 – 63,000

= $837,000

Yearly Amortization of Discount on Issue of Bond

= Total Discount on Issue / Maturity Period

= $63,000 / 20 Years

= $3,150 per year

Total Discount amortized at the end of 10^th Year

= $3,150 x 10

= $31,500

Carrying Value of the Bond at the end of 10^th Year

= Issue Price of the Bond + Total Discount amortized

= $837,000 + 31,500

= $868,500