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On November 1, 2018, Oriole Company purchased 1000 of the $1000 face value, 10% bonds of...

On November 1, 2018, Oriole Company purchased 1000 of the $1000 face value, 10% bonds of Ramsey, Incorporated, for $1030000, which includes accrued interest of $14100. The bonds, which mature on January 1, 2023, pay interest semiannually on March 1 and September 1. Assuming that Oriole uses the straight-line method of amortization and that the bonds are appropriately classified as available-for-sale, the net carrying value of the bonds should be shown on Oriole's December 31, 2018, balance sheet at

$1000000.
$1015264.
$1030000.
$1015900.
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Answer #1

OPTION: $1015264

EXPLANATION:

Bond carrying value = $1030000 - $14100 = $1015900

Premium on bond = $1015900 - $1000000 = $15900

remaining period to maturity = 50 months

Amortization of premium on bond as per SLM = ($15900/50) x 2 = $636

therefore,

net carrying value = $1015900 - $636

= $1015264

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