On January 1 of the current year, Monarch Gaming Company issues 4-year , $600,00

Question

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 questions 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

Explanation / Answer

c $507,000 Issuance price + discount amortization.

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