On July 1, 2009, Noble, Inc.issued 9% bonds in the face amount of $5,000,000, which mature on July 1, 2015.The bonds were issued for $4,695,000 to yield 10%, resulting in a bond discount of $305,000.Noble uses the effective-interest method of amortizing bond discount.Interest is payable annually on June 30.At June 30, 2011, the carrying value of the bonds should be

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The carrying value of the bonds is calculated by adding the amortized discount to the initial issue price. Using the effective-interest method, the interest expense for the first year is $4,695,000 * 10% = $469,500. The actual interest paid is $5,000,000 * 9% = $450,000. The difference of $19,500 is the amortized discount for the first year. For the second year, the carrying value is $4,695,000 + $19,500 = $4,714,500. The interest expense for the second year is $4,714,500 * 10% = $471,450. The actual interest paid remains $450,000. The difference of $21,450 is the amortized discount for the second year. Adding this to the carrying value gives $4,714,500 + $21,450 = $4,735,950.