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On January 1, a company issued and sold a $500,000, 5%, 10-year bond payable, and received proceeds of $496,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is:]

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Tundexi

Answer:

$496,200

Explanation:

Face Value =  $500,000

Issue Proceeds = $496,000

Discount on bonds Issue =  Face Value - Issue Proceeds

Discount on bonds Issue = $500,000 - $496,000

Discount on bonds Issue = $4,000

Life span of the Bond = 10 Years  * 2 = 20 period

Semiannual Bond amortization = $4,000/20 = $200

The Carrying Value of the Bond After First interest payment =  Issue Proceeds + Semiannual Bond amortization

= $496,000 + $200

= $496,200

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