On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that

Question

On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:
Options:
$3,220,000.
$3,340,063.
$3,097,500.
$3,780,000.
$3,902,500. On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:
Options:
$3,220,000.
$3,340,063.
$3,097,500.
$3,780,000.
$3,902,500. On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:
Options:
$3,220,000.
$3,340,063.
$3,097,500.
$3,780,000.
$3,902,500.

Explanation / Answer

current liabilities interest payable (3,500,000*7%*1/2) 122500 122,500 long term liability Bonds payable 3,500,000 less: Discount on bonds (302611 - 10,087*2) 282437 Bonds payable 3,217,563 total liabilities 3,340,063 Answer working notes Amortization Schedule period intt intt Discount Carrying paid expense amortized value 1-Jan 3,197,389 1-Jul 857500 867,587 10,087 3,207,476 1-Jan 857,500 867,587 10,087 3,217,563

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