On January 1, 2013, KMR Co. issued bonds with a face value of $100,000, a term of ten years, and a stated interest rate of 6%. The bonds were issued at 105, and interest is payable each December 31. KMR uses the straight-line method to amortize the bond discount. The carrying value of the bonds that would be reported on the December 31, 2016 balance sheet is:

Question

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$100,000 x 105% = $105,000 issue price; $5,000 premium/10 years = $500 annual amortization of bond premium; Amortization for years 2013 - 2016 = $500 x 4 years = $2,000; Carrying value on 12/31/16 = $105,000 - $2,000 = $103,000