- This topic has 2 replies, 3 voices, and was last updated 8 years, 11 months ago by .
-
Topic
-
On May 1, 20X2, Bolt Corp. issued 11% bonds in the face amount of $1,000,000 that mature on May 1, 20X12. The bonds were issued to yield 10%, resulting in bond premium of $62,000. Bolt uses the effective interest method of amortizing bond premium. Interest is payable semiannually on November 1 and May 1. In its October 31, 20X2, balance sheet, what amount should Bolt report as unamortized bond premium?
a. 62,000
b. 60,100
c. 58,900
d. 58,590
answer b.
I understand how the answer is calculated, but since the question is asking for the balance sheet amount on October 31, and since the interest is not paid until November 1, why is the bond premium reduced? Shouldn’t it remain the same, and not change until November 1?
- You must be logged in to reply to this topic.