Question

	Your answer is incorrect. Try again.

A company issues $25750000, 7.8%, 20-year bonds to yield 8.0% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $25240330. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2017 balance sheet?

$25750000.00

$25266873.92

$25245691.00

$25251270.92

Answer 1

Correct answer--------$25251270.92

Working

Year end	Cash paid	Interest expense	Change in carrying value	Carrying value
1/1/2017				$   25,240,330.00
6/30/2017	$ 1,004,250.00*	$ 1,009,613.20**	$      5,363.20	$   25,245,693.20
12/31/2017	$ 1,004,250.00	$ 1,009,827.73	$      5,577.73	$   25,251,270.93

*Face value x 3.9%

**Carrying value at year end x 4%.