On October 1, 2011, Neman Co.purchased to hold to maturity, 800, $1,000, 9% bonds for $792,000 which includes $12,000 accrued interest.The bonds, which mature on February
1, 2020, pay interest semiannually on February 1 and August 1.Neman uses the straight- line method of amortization.The bonds, which are accounted for under the cost model, should be reported in the December 31, 2011 balance sheet at a carrying value of

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The bonds were purchased for $792,000, which includes $12,000 accrued interest. Therefore, the cost of the bonds themselves was $780,000 ($792,000 - $12,000). The bonds were purchased on October 1, 2011, and Neman will receive the first semiannual interest payment on February 1, 2012. This means that Neman will have held the bonds for 3 months by the end of 2011 (October, November, December). Using the straight-line method of amortization, Neman will amortize $7,800 ($780,000 / 100 x 3) of the bond premium to interest expense in 2011 (October, November, December). Therefore, the carrying value of the bonds on December 31, 2011 should be $780,600 ($780,000 + $7,800).