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31.       OnJanuary 1, Patterson Inc. issued $4,000,000, 9% bonds for$3,756,000. The market rate...31....

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Accounting

31.       OnJanuary 1, Patterson Inc. issued $4,000,000, 9% bonds for$3,756,000. The market rate of interest for these bonds is 10%.Interest is payable annually on December 31. Patterson uses theeffective-interest method of amortizing bond discount. At the endof the second year, Patterson should report unamortized bonddiscount of

a.   $118,400.

b.   $228,400.

c.   $211,240.

d.   $204,000.

Answer & Explanation Solved by verified expert
3.9 Ratings (395 Votes)

Q31 c.   $211,240.
Face Value                               4,000,000.00
Issue Price                             3,756,000.00
Bond Discount                                 244,000.00
Date Interest Payment = Stated Value *9% = A Interest Exp= Prev BV*10% = B Amortisation of Bond Dis = B-A DR bal in Bond Dis C Cr Bal in Bond Payable D Book Value of Bonds = D-C
Jan 01           244,000.00    4,000,000.00          3,756,000.00
Year 01 - Dec 31                                 360,000.00                 375,600.00           15,600.00           228,400.00    4,000,000.00          3,771,600.00
Year 02 - Dec 31                                 360,000.00                 377,160.00           17,160.00           211,240.00    4,000,000.00          3,788,760.00

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In: Accounting31.       OnJanuary 1, Patterson Inc. issued $4,000,000, 9% bonds for$3,756,000. The market rate...31.       OnJanuary 1, Patterson Inc. issued $4,000,000, 9% bonds for$3,756,000. The market rate of interest for these bonds is 10%.Interest is payable annually on December 31. Patterson uses theeffective-interest method of amortizing bond discount. At the endof the second year, Patterson should report unamortized bonddiscount ofa.   $118,400.b.   $228,400.c.   $211,240.d.   $204,000.

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