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On January 1 of the current year, Monarch Gaming Company issues 4-year, $600,000 face value, 4% face rate, coupon bonds which pay interest semi-annually each June 30 and each December 31. On January 1 of the current year, when the bonds are issued to the public, the market rate of interest on similar bonds is 6%.

Completely independent to your solutions for problems 6 and 7, assume the issuance price of the bonds at January 1 of the current year was $505,000, and that the amount of interest expense recorded on June 30 of the current year was $14,000, and therefore $2,000 [interest expense - cash interest = $14,000 - $12,000] of discount was amortized at June 30 of the current year. Using this information, with all other information the same, determine the carrying value [book value] of the bonds at June 30 of the current year?

a) $600,000

b) $505,000

c) $507,000

d) $517,000

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M973905

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