On January 1, 2017, Anthony Corporation issued $800,000 of 7%, 5-year bonds at 97, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2018? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
A)$776,000
B)$787,200
C)$780,800
D)$819,942

Question

Quizplus · Accepted Answer

The bonds were issued at 97, meaning they were issued at a discount (97% of $800,000 = $776,000). The discount is $24,000 ($800,000 - $776,000). Using straight-line amortization, the annual amortization of the discount is $4,800 ($24,000 / 5 years). After one year, the carrying value is $776,000 + $4,800 = $780,800.

On January 1, 2017, Anthony Corporation Issued $800,000 of 7