On January 2, 2016, Wynn Corporation sold $750,000 of bonds for $745,000.The bonds will mature in 10 years and pay interest annually on December 31.Wynn properly recorded the payment of interest and amortization of the discount using the effective interest method.Which of the following statements is true about the carrying value of the bonds and/or the unamortized discount at the end of 2016?

Question

Quizplus · Accepted Answer

The carrying value of the bonds will be greater than $745,000 at the end of 2016 because the discount on the bonds (the difference between the face value and the selling price) is amortized over the life of the bonds, increasing the carrying value each year until it reaches the face value at maturity.

On January 2, 2016, Wynn Corporation Sold $750,000 of Bonds