[The Following Information Applies to the Questions Displayed Below

question 54

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 1, Weller Company issued bonds with a $400,000 face value, a stated rate of interest of 10%, and a 10-year term to maturity. Weller uses the effective interest method to amortize bond discounts and premiums. The market rate of interest on the date of issuance was 8%. Interest is paid annually on December 31.

-Assuming Weller issued the bonds for $431,940,what is the carrying value of the bonds on the December 31,Year 3?

• A)$420,615
• B)$426,495
• C)$414,264
• D)$404,800

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Definitions:

Business Borrowing

The act of obtaining funds by businesses from external sources like banks or financial institutions to finance operations or investments.

Loanable Funds

The total quantity of funds available for borrowing in the financial markets, determined by savings and the willingness of individuals and institutions to lend.

Interest Rates

The cost of borrowing money or the return for lending money, typically expressed as a percentage of the principal amount per annum.

Loanable Funds

The sum of money available for borrowing in the financial markets, where interest rates adjust to match supply and demand.