McLennan Corporation issued S400000 of 7 10year bonds The b

McLennan Corporation issued S400.000 of 7 % 10-year bonds. The bonds are dated and sold on January 1, 2015 Interest payment dates are January 1 and July 1 The bonds are issued for S372 819 to yield the market interest rate of 8% Using straight-line amortization, the carrying amount of McLennan Corporation\'s bonds at December 31, 2015, is (Final answers are rounded.) OA. $371,460 O B. $370,101 O C. $374,178 O D. $375,537

Solution

Face Value of Bonds = $ 400,000
Issue Price of Bonds = $ 372,819

Discount on Bond Issue = 400000 - 372819 = $ 27,181

Life = 10 Years

Annual Amortization of Discount (SLM) = 27181/10 = 2718.10

Bond Issued at = 1 Jan 2015
Current Date = 31 Dec 2015
Years since issued = 1

Total Discount amortized till now = 1 * 2718.1 = 2718.1

Carry AMount of Bond on 31 Dec 2015 = Bond Issue Price + Total Discount amortized till now
Carry AMount of Bond on 31 Dec 2015 = 372819 + 2718.10
Carry AMount of Bond on 31 Dec 2015 = 375537.10

Correct Option - D $375,537