Question: Webb Co. has outstanding a 7%, ten-year $100,000 face-value bond. The bond was originally sold to yield 6% annual interest. Webb uses the effective interest

Webb Co. has outstanding a 7%, ten-year $100,000 face-value bond. The bond was originally sold to yield 6%

annual interest. Webb uses the effective interest rate method to amortize bond premium, and does not elect the fair value option for reporting financial liabilities. On June 30, 2010, the carrying amount of the outstanding bond was $105,000.

What amount of unamortized premium on bond should Webb report in its June 30, 2011 balance sheet?

a. $1,050

b. $3,950

c. $4,300

d. $4,500

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