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.)

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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