Question: Webb Company has outstanding a 7% annual, 10-year, $100,000 face value bond that was issued by the company several years ago. The bond was originally sold to yield 6% annual interest. Webb uses the effective interest rate method to amortize the bond premium. On June 30, 2005 the carrying amount of the outstanding bond was $105,000.
Required:
What amount of unamortized premium on the bond should Webb report in its June 30, 2006 balance sheet?