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17 May, 00:45

On October 1, 2018, Renfro Company purchased to hold to maturity, 4,000, $1,000, 9% bonds for $3,960,000 which includes $60,000 accrued interest. The bonds, which mature on February 1, 2027, pay interest semiannually on February 1 and August 1. Renfro uses the straight-line method of amortization. The bonds should be reported in the December 31, 2018 balance sheet at a carrying value of

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  1. 17 May, 01:14
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    Carrying Value=$3,903,000

    Explanation:

    First we will calculate the face value:

    Face value=4000*$1000

    Face value=$4,000,000

    Purchase Price = Bond Purchased price - Accrued Interest

    Purchase Price=$3,960,000-$60,000

    Purchase Price=$3,900,000

    Total months=100 months

    Straight line Discount amortization = (Face Value-Purchase Price) / Total Months

    Straight line Discount amortization = ($4,000,000-$3,900,000) / 100

    Straight line Discount amortization=$1,000

    Discount Amortization=Straight line Discount amortization*Discount months

    Discount Amortization=$1,000*3

    Discount Amortization=$3,000.

    Carrying Value=Purchase Price+Discount Amortization

    Carrying Value=$3,900,000+$3,000

    Carrying Value=$3,903,000
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