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Wayne Company issued bonds with a face value of $600,000,a 6% stated rate of interest,and a 10-year term.The bonds were issued on January 1,2016,and Wayne uses the straight-line method of amortization.Interest is paid annually on December 31.
-Assuming Wayne issued the bonds for 102½,the carrying value of the bonds on the December 31,2016 balance sheet would be:
A)$601,500.
B)$613,500.
C)$615,000.
D)$616,500.

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The bonds were issued for 102.5% of their face value, or $600,000 x 1.025 = $615,000. Since the company uses the straight-line method, it will amortize the bond discount evenly over the life of the bond. The annual amortization is ($615,000 - $600,000) / 10 = $1,500. After one year, the carrying value of the bonds will be $615,000 - $1,500 = $613,500. Therefore, the correct option is (B), $613,500.

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