A company purchased bonds on July 1, 2021, for $193,404. This price represents a market rate of 9% on bonds that have a face amount of $200,000, have a stated rate of 8%, pay semiannual interest, and mature in 4 years. As of December 31, 2021, the fair value of the bonds has increased to $195,000. Assuming the investment is classified as held-to-maturity securities, what amount would the company report for its investment in bonds on December 31, 2021

$194,107

Explanation:

if the bonds were available for sale, then they should be recorded at market price = $195,000

but these bonds are held to maturity bonds, therefore, they must be recorded at carrying value:

amortization of bond discount = ($193,404 x 9%/2) - ($200,000 x 8%/2) = $8,730 - $8,000 = $703

carrying value  = $193,404 + $703 = $194,107

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