Net Work Corporation, whose annual accounting period ends on

Question

Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds:

Date of bonds: January 1, 2009
Maturity amount and date: $200,000 due in 10 years (December 31, 2018)
Interest: 10 percent per year, payable each December 31
Date issued: January 1, 2009

Please provide the amounts to be reported on the January 1, 2009, financial statements immediately after the bonds were issued. 
January 1, 2009 Financial Statements:
- Part A (Issued at 100)
- Part B (Issued at 97)
- Part C (Issued at 101)
(A) Bonds Payable
(B) Unamortized premium (or discount)
(C) Carrying value  
Could someone please assist me with this problem and explain how you arrived at the answer? I would like to understand the process. Thank you.

Aric Kulas Jr. · Accepted Answer

Part A(A) Bonds Payable This is always the face value, so  $200,000(B) Unamortized premium (or discount)$0, since the bonds are issued at 100%(C) Carrying value (CV)CV =  Face value &ndash; Discount on bonds payable OR Face value + Premium on bonds payable, so $200,000Part B(A) Bonds Payable This is always the face value, so  $200,000(B) Unamortized premium (or discount)Since the bonds are issued at 97, i.e. BELOW face value, there would be a discount of $6,000 ($200,000 x 3%)(C) Carrying valueCV = Face value &ndash; Discount, so $200,000 &ndash; $6,000 = $194,000 (proof: $200,000 x 0.97)Part C (A) Bonds Payable This is always the face value, so  $200,000(B) Unamortized premium (or discount)Since the bonds are issued at 101, i.e., ABOVE face value,  there would be a premium of $2,000 ($200,000 x 1%)(C) Carrying valueCV = Face value + Premium, so $200,000 + $2,000 = $202,000 (proof: $200,000 x 1.01)

Anonymous · Answer

I agree with most of what has been said

Anonymous

Net Work Corporation, whose annual accounting period ends on

2 Answers

AI-Powered Insights

Want to answer this question?

Categories

Tags

Related Questions