On January 1 of Year 1, Congo Express Airways issued $3,100,000 of 8% bonds that

Question

On January 1 of Year 1, Congo Express Airways issued $3,100,000 of 8% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $2,850,000 and the market rate of interest for similar bonds is 9%. The bond premium or discount is being amortized at a rate of $8,333 every six months. After accruing interest at year end, the company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:

3,333,334

2,990,666

2,742,666

3,457,334

2,866,666

Explanation / Answer

Total liabilities associated with the bond issue = (2850000+8333+8333)+(3100000*8%/2)= 2990666 Option 2 is correct If interest accrued is not accrued part of bond liabilities, then answer will be 2,866,666

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.