# Net Work Corporation, whose annual accounting period ends on

Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds:

Date of bonds: January 1, 2009.

Maturity amount and date: \$200,000 due in 10 years (December 31, 2018).

Interest: 10 percent per year payable each December 31.

Date issued: January 1, 2009.

Provide the following amounts to be reported on the January 1, 2009, financial statements immediately after the bonds were issued

January 1, 2009 Financial Statements: Part A Part B Part C

``                                       (Issued at 100)       (97)           (101)``

(A) Bonds Payable

(C) Carrying value

• Part A

(A) Bonds Payable

This is always the face value, so \$200,000

\$0, since the bonds are issued at 100%

(C) Carrying value (CV)

CV = Face value – Discount on bonds payable OR Face value + Premium on bonds payable, so \$200,000

Part B

(A) Bonds Payable

This is always the face value, so \$200,000

Since the bonds are issued at 97, i.e. BELOW face value, there would be a discount of \$6,000 (\$200,000 x 3%)

(C) Carrying value

CV = Face value – Discount, so \$200,000 – \$6,000 = \$194,000 (proof: \$200,000 x 0.97)

Part C

(A) Bonds Payable

This is always the face value, so \$200,000