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The market rate of interest for similar bonds is 9%.

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On January 1 of Year 1, Drum Line Airways issued $3,750,000 of par value bonds for $3,440,000. The bonds pay interest semiannually on January 1 and July 1. The contract rate of interest is 8% while the market rate of interest for similar bonds is 9%. The bond premium or discount is being amortized at a rate of $10,333 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:
$3,310,666.
$4,039,334.
$3,460,666. wrong answer
$4,189,334.
$3,610,666.

Reference no: EM13336100

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