A company issues 16000000 58 20year bonds to yield 6 on Janu

A company issues $16000000, 5.8%, 20-year bonds to yield 6% on January 1, 2016, Interest is paid on June 30 and December 31. The proceeds from the bonds are $15630164. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018? O $15685639 O $15893463 O $15663371 O $15690669

Solution

Discount on bonds issue = 16000000-15630164 = 369836

Semiannual amortization of discount on bond issue = 369836/40 = 9245.90

Carrying value of bonds on december 31,2018 = Face value-Unamortized discount on bonds

= 16000000-(369836-55475.40)

Carrying value of bonds on december 31,2018 = 15685639

So answer is a) $15685639