On January 2, 2015, Concrete Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

Question

Quizplus · Accepted Answer

First, we need to calculate the interest expense for the first six months:

$500,000 * 6% * 6/12 = $15,000

The interest payment on June 30, 2015, would be:

$500,000 * 8% * 6/12 = $20,000

To calculate the carrying value after the interest payment, we need to subtract the interest expense from the bond's face value and add the premium amortization:

Carrying value = Face value - Accumulated amortization + Unamortized premium

Carrying value = $500,000 - $15,000 + ($574,540 - $500,000) = $571,540

Therefore, the correct choice is B) $571,776, which is the carrying value rounded to the nearest dollar.