210. On January 1, Grogan Corporation issues $2,000,000, 5-year, 12% bonds at 96 with interest payable on July 1 and January 1. Grogan uses the straight-line amortization method The carrying value of the bonds at the end of the third interest period is

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The carrying value of the bonds at the end of the third interest period is $1,944,000. The bonds were issued at a discount, so the carrying value will increase over time as the discount is amortized. The straight-line amortization method allocates the discount evenly over the life of the bonds. In this case, the discount is $40,000 ($2,000,000 x 4%). The discount will be amortized over 5 years, so the annual amortization is $8,000. The carrying value of the bonds at the end of the third interest period is $1,944,000 ($2,000,000 + $8,000 x 3).