Dakota Company issued $700000 of 6% 5-year bonds at 98 with interest paid annually. Assuming straight-line amortization what is the carrying value of the bonds after one year?

Question

Quizplus · Accepted Answer

The bond discount is equal to $700000 - ($700000 * 0.98) = $14000. Straight-line amortization of the discount is $14000/5 = $2800 per year. After one year, $2800 of the discount has been amortized, so the carrying value of the bonds is $700000 - $14000 + $2800 = $688800.

Dakota Company Issued $700000 of 6% 5-Year Bonds at 98