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What is the carrying value of the bonds on the balance sheet

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Question - Company Inc. currently has bonds with a $800,000 face value. At 1/1 of the current year the carrying value of these bonds was $854,000. (The bonds were issued in a prior year at a premium.)

The bonds were issued many years ago when the market rate was 7%. The stated rate of interest on the bonds was 8%. Interest is paid annually at December 31. Company uses the effective interest rate method to amortize discounts and premiums.

Required -

1. Compute the interest paid to bondholders on 12/31 of the current year.

2. Compute the interest expense recognized on 12/31 of the current year.

3. What is the carrying value of the bonds on the balance sheet at 12/31 of the current year?

Reference no: EM133154059

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