205. Pakota Company issued $700,000 of 6%, 5-year bonds at 98, with interest paid 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 $686,000 ($700,000 x 0.98). The discount on the bonds is $14,000 ($700,000 - $686,000). Using straight-line amortization, the annual amortization of the discount is $2,800 ($14,000 / 5 years). After one year, the carrying value of the bonds is $686,000 + $2,800 = $688,800.