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Target Corporation issues a 20-year $9,000,000 bond on January 1, 20xx with a 9% stated interest rated. Interest is paid semiannually on June 30 and December 31st. The bond will mature in twenty years. When Target Corporation retires the bond at the end of 20 years, what amount will they debit to the bonds payable account?

Sagot :

anthougo

Answer:

Target Corporation

The amount that will be debited to the bonds payable account on December 31, 2020 will be:

= $9,000,000

Explanation:

a) Data and Calculations:

January 1, 20xx:

Face value of bonds issued = $9,000,000

Maturity period = 20 years

Stated interest rate = 9%

Interest payment = June 30 and December 31

Semiannual Interest Payment in dollars = $405,000 ($9,000,000 * 4.5%)

b) At maturity of the bonds after 20 years, Target Corporation will debit the Bonds Payable account and credit its Cash account with the sum of $9,000,000.  On that date, the bond's carrying amount will be equal to the Bonds Payable account balance, all things remaining equal.

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