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11 July, 02:17

PB10-4 Comparing Bonds Issued at Par, Discount, and Premium [LO 10-3] Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2018. The bonds pay interest each December 31 and mature 10 years from January 1, 2018. Required: For each of the three independent cases that follow, provide the following amounts to be reported on the January 1, 2018, financial statements immediately after the bonds were issued: (Deductions should be indicated by a minus sign.)

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  1. 11 July, 02:31
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    Amount:

    For Case A = $500,000

    For Case B = $475,000

    For Case C = $525,000

    Explanation:

    As per the data given in the question,

    Bond value = $500,000

    Rate = 7%

    Numbers of year for maturity = 10

    As per the formula,

    Amount = Bond value * Deviation%

    = 500,000 * 5%

    = $25,000

    So Case A : $500,000 + 0 = $500,000

    Case B : $500,000 - $25,000 = $475,000

    Case C : $500,000 + $25,000 = $525,000

    Case A (issued at 100) Case B (at 95) Case C (at 105)

    Bonds Payable $500,000 $500,000 $500,000

    Unamortized premium

    or Discount 0 $25,000 $25,000

    Carrying value $500,000 $475,000 $525,000
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