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What is the carrying value of the bonds at maturity

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Question 1 - Assume Kelly Corporation uses the effective interest rate method for amortizing bond premiums and discounts. Kelly Corporation issued bonds on January 1, Year1. The bonds have a face value of $291000 and mature in 15 years. The stated interest rate is 4%. The market rate at date of issue was 6%. The bond pays interest annually on December 31.

1. How much interests will the bond pay on December 31, Year1?

2. What was the issue price of the bond?

Question 2 - Assume Carrie Corporation uses the effective interest rate method for amortizing bond premiums and discounts. Carrie Corporation issued bonds in an earlier year. The bonds have a face value of $120000. The stated interest rate is 10%. The bond pays interest annually on December 31. The market rate of interest when the bonds were issued was 8%. On December 31 of the current year, immediately before recording the annual interest payment, the carrying value of the bonds was $132494. The market interest rate on this date is 6.5%. Round any interest payment and interest expense computations to the nearest dollar as you do computations.

1. Was the bond originally issued at a premium or a discount?

2. What is the carrying value of the bonds on after the interest payment is made in the current year?

3. What is the carrying value of the bonds at maturity?

Reference no: EM131599035

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