Question

On January 1, Bramble Corp. issued $6200000, 9% bonds for $5895000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Bramble uses the effective-interest method of amortizing bond discount. At the end of the first year, Bramble should report unamortized bond discount of

$246050.

$273500.

$243000.

$262500.

Answer 1

Answer 273,500 Credit Working Notes: Account Titles and Explanation Jnauary.1 Cash Discount on Bonds payable Bonds Payable (Being bonds issued recorded) | $ $ Debit 5,895,000 305,000 $ 6,200,000 $ 589,500 June. 30,2021 Interest expense Discount on Bonds payable Cash (Being Interest Expenses recorded) $ $ 31,500 558,000 Interest Expenses = $5,895,000*10% = $589,500 Cash = $6,200,000*9% = $558,000 Discount on bonds payable = $589,500-$558,000 = $31,500 At the end of first year unamortized bond discount is = $305,000-$31,500 = $273,500