Kaleidoscope Paint
On January 1, Year 1, this company issued $500,000, 10-year, 9% bonds for $480,745. The bonds pay interest on June 30 and December 31. The market rate is 10%. The company plans to use the effective interest method of amortizing bond discounts and premiums. Refer to the PV table on pages 717 to 720 of the text.
-Refer to the figure Kaleidoscope Paint.What is the carrying value of the bonds on the maturity date?

Question

Quizplus · Accepted Answer

Using the effective interest method, the bond discount of $19,255 is amortized over the life of the bond. The carrying value of the bond on the maturity date will be equal to the face value of the bond, which is $500,000. Therefore, the correct answer is D.

Kaleidoscope Paint On January 1, Year 1, This Company Issued $500,000, 10-Year