On January 1, 2015, Clarkson, Inc.issued $400,000, 10-year, 10% bonds for $354,200.The bonds pay interest on June 30 and December 31.The market rate is 12%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

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The carrying value of the bonds on January 1, 2015 is the issue price of $354,200. The first interest payment of $20,000 ($400,000 x 10% x 6/12) is made on June 30, 2015. The amortization of the bond discount using the effective interest rate method is ($400,000 - $354,200) x 12% = $4,988. Therefore, the carrying value of the bond after the interest payment on June 30, 2015, is $354,200 + $4,988 - $20,000 = $339,188. The carrying value of the bond is updated each time an interest payment is made.