Neufeld Company issued $2,000,000 of 6%, 5-year bonds at 98, which pay interest annually.Assuming straight-line amortization, what is the carrying value of the bonds after one year?

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The bonds were issued at 98, meaning they were sold for 98% of their face value, which is $1,960,000. The discount on the bonds is $40,000 ($2,000,000 - $1,960,000). Using straight-line amortization, the annual amortization of the discount is $8,000 ($40,000 / 5 years). After one year, the carrying value is $1,960,000 + $8,000 = $1,968,000.

Neufeld Company Issued $2,000,000 of 6%, 5-Year Bonds at 98