Question
On September 1, 2016, Howell Company purchased 600 of the $1,000 face value, 9% bonds of Ramsey, Incorporated, for $625,000 (an 8% effective interest rate).
On September 1, 2016, Howell Company purchased 600 of the $1,000 face value, 9% bonds of Ramsey, Incorporated, for $625,000 (an 8% effective interest rate). The bonds, which mature on September 1, 2021, pay interest semiannually on March 1 and September 1. Assuming that Howell uses the effective interest method of amortization and that the bonds are appropriately classified as non-trading, the net carrying value of the bonds should be shown on Howell's December 31, 2016, statement of financial position at
$625,000.
$600,000.
$623,667.
$622,333.
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