On August 1, 2008, Allen Company issued $2,268,000 of 10-year,10% bonds at 112.

Question

On August 1, 2008, Allen Company issued $2,268,000 of 10-year,10% bonds at 112. The bonds were dated August 1, 2008, and payinterest on August 1 and February 1. Allen Company uses thestraight-linemethod to amortize the discount or premium. Assuming that the entry to amortize thediscount or premium to date has been made, what is the carrying valueof the bonds on December 31, 2015? On August 1, 2008, Allen Company issued $2,268,000 of 10-year,10% bonds at 112. The bonds were dated August 1, 2008, and payinterest on August 1 and February 1. Allen Company uses thestraight-linemethod to amortize the discount or premium. Assuming that the entry to amortize thediscount or premium to date has been made, what is the carrying valueof the bonds on December 31, 2015?

Explanation / Answer

The corporation’s journal entry torecord the issuance of the bond on Feb 1, 2009 willbe:

Feb. 1, 2009 Cash 113,400

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