$920,000. $912,000. $908,800. $896,000. On October 1, 2012, Wenn Co. purchased 8

Question

       $920,000.
       $912,000.
       $908,800.
       $896,000.

On October 1, 2012, Wenn Co. purchased 800 of the $1,000 face value, 8% bonds of Loy, Inc., for $936,000, including accrued interest of $16,000. The bonds, which mature on January 1, 2019, pay interest semiannually on January 1 and July 1. Wenn used the straight-line method of amortization and appropriately recorded the bonds as available-for-sale. On Wenn's December 31, 2013 balance sheet, the carrying value of the bonds is (Points : 2)

Explanation / Answer

$896,000

$936,000 - $ 16,000 interest = $920,000

hence $920,000 - $800,000 = $120,000 premium

Amortisation of premium   = 120,000*15/75          = $24,000

Carrying value                    = $920,000 - $24,000   = $896,000

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