On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount.
- The carrying value of the bonds immediately after the first interest payment is:

Question

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The discount on the bond is $4,000 ($400,000 - $396,000). Using the straight-line method, the discount is amortized evenly over the bond's life. The annual amortization is $400 ($4,000 / 10 years), so for six months, it's $200. The carrying value after the first interest payment is $396,000 + $200 = $396,200.

On January 1, a Company Issued and Sold a $400,000