Use the following information to answer the next three quest

Use the following information to answer the next three questions. On January 1, oothill Company issued a $20,000 face value bond that sold for 110. term and a stated annual rate of interest of 8 percent 20X2, The bond had a ten-year 8. The carrying value of the bond liability on Api 1, 20x2, would be $20,000 $22,000. $21,800. $20,200 Januar 9. The amount of interest expense on the company\'s December 31, 20X2, income statement would be a $1,200. Inters paymeht 1000 Inruiexp. is s200 ess 1400 $1,400. c. $1,600 d. $1,050. 31, 20X3, income statement

Solution

8)Carrying value of bond

Face value = 20000$ at 100

So at 110 the value wiil be = 20000*110% = 22000$

So carrying value of bond will be 22000$

Option b is correct

9) Interest expense on December 31,

Interest for the year = 20000*8% = 1600$

Premium amoritze for year (income)

22000-20000 = 2000 premium

Life of bond 10 year

Amortization per year 2000/10,= 200$

So interest expense for December 31 would be

1600 interest - 200 premium amortization

= 1400 would be interest expense

Option b is correct