PB10-4 Comparing Bonds Issued at Par, Discount, and Premium [LO 10-3] Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2018. The bonds pay interest each December 31 and mature 10 years from January 1, 2018. Required: For each of the three independent cases that follow, provide the following amounts to be reported on the January 1, 2018, financial statements immediately after the bonds were issued: (Deductions should be indicated by a minus sign.)

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Business

Kennedy Montes

12 May, 11:32

PB10-4 Comparing Bonds Issued at Par, Discount, and Premium [LO 10-3] Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2018. The bonds pay interest each December 31 and mature 10 years from January 1, 2018. Required: For each of the three independent cases that follow, provide the following amounts to be reported on the January 1, 2018, financial statements immediately after the bonds were issued: (Deductions should be indicated by a minus sign.)

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Answers (1)

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Kaylee Barber · Answer 1

Amount:

For Case A = $500,000

For Case B = $475,000

For Case C = $525,000

Explanation:

As per the data given in the question,

Bond value = $500,000

Rate = 7%

Numbers of year for maturity = 10

As per the formula,

Amount = Bond value * Deviation%

= 500,000 * 5%

= $25,000

So Case A : $500,000 + 0 = $500,000

Case B : $500,000 - $25,000 = $475,000

Case C : $500,000 + $25,000 = $525,000

Case A (issued at 100) Case B (at 95) Case C (at 105)

Bonds Payable $500,000 $500,000 $500,000

Unamortized premium

or Discount 0 $25,000 $25,000

Carrying value $500,000 $475,000 $525,000