Carry Bond Value - Balance Sheet
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A company issues $20,000,000, 7.8%, and 20-year bonds to yield 8% on January 1, 2007. The interest is paid on June 30 and on December 31. The proceeds from the bonds are $19,604,145.
Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2007 balance sheet?
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Solution Summary
In just under 100 words, this solution explains how to determine the carrying value of the bonds for the company in question. This is determined using the effective-interest amortization method for the hypothetical 2007 balance sheet applying to this company.
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Under the effective method, interest expense is calculated as carrying value X effective interest. The difference between the cash interest paid and the interest ...
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