On July 1,20B,WildWorld Inc.sold (issued)300,$1,000,ten-year,7% bonds at 101.The bonds were dated July 1,20B,and semi-annual interest will be paid each December 31 and June 30.WildWorld uses straight-line amortization.What is the bond liability that would be reported on the statement of financial positionat December 31,20B?

Question

Quizplus · Accepted Answer

The bonds were issued at 101, meaning they were sold at 101% of their face value. The face value is $300,000 (300 bonds x $1,000 each), so the issue price is $303,000. The premium is $3,000 ($303,000 - $300,000). Using straight-line amortization over 10 years (20 periods), the semi-annual amortization is $150 ($3,000 / 20). By December 31, 20B, one period of amortization has occurred, reducing the premium by $150. Therefore, the bond liability is $303,000 - $150 = $302,850.