Hooker Company sells $200,000 of ten-year,8% bonds to yield 10% on January 1,2014.The bonds pay interest annually on December 31.The bonds were sold at a discount of $24,578.The bond carrying amount at the end of 2014 is
A)$175,422.
B)$176,964.
C)$200,000.
D)$201,542.

Question

Quizplus · Accepted Answer

The bond carrying amount at the end of 2014 can be calculated using the following formula:

Bond carrying amount = Face value of bonds - Discount on bonds + Amortization of discount

The face value of the bonds is $200,000, and the discount on bonds is $24,578. The amortization of discount for the first year can be calculated as follows:

Amortization of discount = Discount on bonds / Number of years to maturity
Amortization of discount = $24,578 / 10
Amortization of discount = $2,457.80

Therefore, the bond carrying amount at the end of 2014 is:

Bond carrying amount = $200,000 - $24,578 + $2,457.80
Bond carrying amount = $176,964

Hence, the best choice is B.

Hooker Company Sells $200,000 of Ten-Year,8% Bonds to Yield 10