194. On January 1, Gage Corporation issues $1,000,000, 10-year, 12% bonds at 95 with interest payable on January 1. The carrying value of the bonds, using straight-line amortization, at the end of the third interest period is:

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The carrying value of the bonds is the present value of the future cash flows, which include the interest payments and the principal payment at maturity. The interest payments are $120,000 per year, and the principal payment is $1,000,000. The bonds were issued at a discount, so the carrying value is less than the face value. The discount is amortized over the life of the bonds using straight-line amortization. The carrying value at the end of the third interest period is $965,000.