On January 1, 2014, Varden Ltd.issued $4,000,000, 10% bonds, which mature on January 1, 2024.The bonds were issued for $4,540,000 to yield 8%.Varden uses the effective interest method of amortizing bond premium.Interest is payable annually on December 31.At December 31, 2014, the adjusted balance in the Bonds Payable account should be

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The adjusted balance in the Bonds Payable account is calculated by subtracting the amortized premium from the initial carrying amount. The interest expense for 2014 is 8% of $4,540,000, which is $363,200. The cash interest paid is 10% of $4,000,000, which is $400,000. The premium amortized is $400,000 - $363,200 = $36,800. Therefore, the adjusted balance is $4,540,000 - $36,800 = $4,503,200.