Early Bond Retirement, Effective Interest
Rate Method. On January 1, 2018, Faxico, Inc. issued...

Question

Early Bond Retirement, Effective Interest
Rate Method. On January 1, 2018, Faxico, Inc. issued $4,500,000 par value 8%,
5-year bonds. Interest is payable semiannually on January 1 and July 1 with the
first interest payment on July 1, 2018. The market rate of interest on the date
of the bond issue was 10%. Faxico retired the debt early at the end of the
third year for $4,000,000.

Required »

a. Determine the carrying value of the bond
at retirement.

b. Prepare the journal entry to record the
early retirement of the debt at the end of the third year.

Sandeep · Accepted Answer

Ans a 	The Carrying value of the Bond refers to the face value of the Bond, plus any Unamortized premiums or minus any unamortized discounts. However, the same can also be calculated using the formula in excel:
= PV (rate, nper , pmt, FV,

Early Bond Retirement, Effective Interest Rate Method. On January 1, 2018, Faxico, Inc. issued $4,500,000 par value 8%, 5-year bonds. Interest is payable semiannually on January 1 and July 1 with the...

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