A company issues $20,000,000, 7.8%, and 20-year bonds to yield 8% on January 1, 2007. The interest is paid on June 30 and on December 31. The proceeds from the bonds are $19,604,145.
Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2007 balance sheet?
Under the effective method, interest expense is calculated as carrying value X effective interest. The difference between the cash interest paid and the interest ...
In just under 100 words, this solution explains how to determine the carrying value of the bonds for the company in question. This is determined using the effective-interest amortization method for the hypothetical 2007 balance sheet applying to this company.