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Chapter 12: Q10RQ (page 654)

What is the carrying amount of a bond?

Short Answer

Expert verified

Difference between the bond payable and discount amount is the carrying amount of bond.

Step by step solution

01

Definition of bond

A bond is shown as the liabilities in the books of accounts. Bond is the value of loan take by the company by making bond agreement.

02

Carrying amount of bond

The price at which the bond is purchased is known as the carrying amount of the bond. Carrying value is calculated by subtracting unamortised discount and adding unamortised premium in the face value.

For example: If the face value of a bond is $35, but it is purchased at $40, then $40 is known as the carrying amount of the bond.

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Most popular questions from this chapter

Computing the debt to equity ratio

Ludwig Corporation has the following data as of December 31, 2018:

Total Current Liabilities \( 36,210 Total Stockholders鈥� Equity \) ?

Total Current Assets 58,200 Other Assets 36,800

Long-term Liabilities 139,630 Property, Plant, and Equipment, Net 206,440

Compute the debt to equity ratio at December 31, 2018.

Herrera Corporation issued a $400,000, 4.5%, 10-year bond payable on January 1, 2018. Journalize the payment of the bond

payable at maturity. (Give the date.)

Using the effective-interest amortization method

On December 31, 2018, when the market interest rate is 8%, Biggs Realty issues

\(450,000 of 5.25%, 10-year bonds payable. The bonds pay interest semiannually. The

present value of the bonds at issuance is \)365,732.

Requirements

1. Prepare an amortization table using the effective interest amortization method for

the first two semiannual interest periods. (Round to the nearest dollar.)

2. Using the amortization table prepared in Requirement 1, journalize issuance of the

bonds and the first two interest payments.

Where is the current portion of notes payable reported on the balance sheet?

Determining the present value of bonds payable

Interest rates determine the present value of future amounts. (Round to the nearest

dollar.)

Requirements

1. Determine the present value of 10-year bonds payable with face value of $86,000

and stated interest rate of 14%, paid semiannually. The market rate of interest is

14% at issuance.

2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.

3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.
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