On January 1, 2009, Zebra Corporation issued 1,000 of its 8%, $1,000 bonds at 98. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2019. Zebra paid $50,000 in bond issue costs. Zebra uses the straight-line amortization method. What is the bond carrying value reported in the December 31, 2009, balance sheet?
A)$1,045,000.
B)$1,040,000.
C)$987,000.
D)$982,000.$980,000 + [($1,000,000 $980,000) 1/10] = $982,000 Bond issue costs are reported and amortized separately.

Question

Quizplus · Accepted Answer

The carrying value of the bond is the face value of the bond minus the unamortized discount. The discount is calculated as the bond issue price minus the face value, which is $1,000,000 - ($1,000 x 1,000 x 0.98) = $20,000. 
Since the bond issue costs are reported and amortized separately, they do not affect the carrying value calculation. 
The amortization for the first year is $20,000 / 10 = $2,000. 
Therefore, the bond carrying value reported in the December 31, 2009, balance sheet is $1,000,000 - $20,000 + $2,000 = $982,000.

On January 1, 2009, Zebra Corporation Issued 1,000 of Its