A company issues 15900000 58 20year bonds to yield 6 on Janu

A company issues $15900000, 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 $15532475. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2018

a.

b.

c.

a.

$15592634

Solution

Bonds Par Value = $       1,59,00,000 Less: Proceeds From sale of Bonds $       1,55,32,475 Difference $       3,67,525.00 This difference will amortize over the 20 years in equla installment Equal installment = $       3,67,525.00 Divide By \"/\"By Years = $                   20.00 Years Amortization amount per year = $           18,376.25 Till the December 31, 2018 amount amortize = $           55,128.75 So Carrying value of the Bonds = Issue Value + Amortized Amount Issue Value = $       1,55,32,475 Add: Amortize Value in 3 years $           55,128.75 Carrying Value $ 1,55,87,603.75 Carrying Value (Round off) $       1,55,87,604 Answer = Option D = $       1,55,87,604