QuestionAugust 4, 2025

Emily Austin Fitness Gym has 800,000 of 10-year bonds payable outstanding. These bonds had a discount of 56,000 at issuance, which was 5 years ago. The company uses the straight-line amortization method. The current carrying amount of these bonds payable is A. 744,000 B. 800,000 C. 772,000 D. 828,000

Emily Austin Fitness Gym has 800,000 of 10-year bonds payable outstanding. These bonds had a discount of 56,000 at issuance, which was 5 years ago. The company uses the straight-line amortization method. The current carrying amount of these bonds payable is A. 744,000 B. 800,000 C. 772,000 D. 828,000
Emily Austin Fitness Gym has 800,000 of 10-year bonds payable outstanding. These bonds had a discount of 56,000 at issuance, which was 5 years ago. The company uses the straight-line amortization method. The current carrying amount of these bonds payable is A. 744,000 B. 800,000 C. 772,000 D. 828,000

Solution
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Answer

C. \772,000 Explanation 1. Calculate Annual Amortization The total discount is \56,000 over 10 years. **Annual amortization** = \frac{56,000}{10} = 5,600. 2. Calculate Total Amortization for 5 Years Total amortization after 5 years = 5,600 \times 5 = 28,000. 3. Calculate Current Carrying Amount Initial carrying amount = \800,000 - \56,000 = \744,000. Add amortized amount: \744,000 + \28,000 = \772,000.

Explanation

1. Calculate Annual Amortization<br /> The total discount is \$56,000 over 10 years. **Annual amortization** = $\frac{56,000}{10} = 5,600$.<br /><br />2. Calculate Total Amortization for 5 Years<br /> Total amortization after 5 years = $5,600 \times 5 = 28,000$.<br /><br />3. Calculate Current Carrying Amount<br /> Initial carrying amount = \$800,000 - \$56,000 = \$744,000. Add amortized amount: \$744,000 + \$28,000 = \$772,000.
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