$17,407,069. $17,317,990. $17,233,953. $19,307,069. Discount-Mart issues $19 mil
ID: 2468226 • Letter: #
Question
$17,407,069.
$17,317,990.
$17,233,953.
$19,307,069.
Discount-Mart issues $19 million in bonds on January 1, 2012. They have a eight-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/12 $17,079,880 6/30/12 $950,000 $1,024,793 $74,793 17,154,673 12/31/12 950,000 1,029,280 79,280 17,233,953 6/30/13 950,000 1,034,037 84,037 17,317,990 12/31/13 950,000 What is the carrying value of the bonds as of December 31, 2013?
Explanation / Answer
Market Interest Rate ( Half Yearly) = Interest Expenses/Beginning Carrying Value
Market Interest Rate ( Half Yearly) = 1024793/17079880
Market Interest Rate ( Half Yearly) = 6%
Interest Expenses on December 31, 2013 = Market Interest Rate * Carrying Value on 6/30/13
Interest Expenses on December 31, 2013 = 6%*17,317,990
Interest Expenses on December 31, 2013 = 1039079
Increase in Carrying Value = Interest Expenses on December 31, 2013 - Interest Paid on December 31, 2013
Increase in Carrying Value = 1039079 - 950000
Increase in Carrying Value = 89079
Carrying value of the bonds as of December 31, 2013 = Carrying Value on 6/30/13 + Increase in Carrying Value
Carrying value of the bonds as of December 31, 2013 = 17,317,990+89079
Carrying value of the bonds as of December 31, 2013 = 17,407,069
Answer
17,407,069
Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/12 17,079,880 6/30/12 950,000 1,024,793 74,793 17,154,673 12/31/12 950,000 1,029,280 79,280 17,233,953 6/30/13 950,000 1,034,037 84,037 17,317,990 12/31/13 950,000 1,039,079 89,079 17,407,069Related Questions
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