On January 2,2012,Kampai Sushi Bar sold $800,000 of bonds for $785,000.The bonds will mature in 10 years and pay interest annually on December 31.The company 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 2012?

Question

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The bond was sold at a discount, which means the carrying value will increase over time as the discount is amortized. Therefore, the carrying value will be greater than $785,000 at the end of 2012. Option A is incorrect because the carrying value will increase over time, not decrease. Option B is incorrect because some of the discount will have been amortized by the end of 2012, resulting in a higher carrying value than the initial sale price. Option D is also incorrect because the bond was sold at a discount, so there is no premium to be unamortized.

On January 2,2012,Kampai Sushi Bar Sold $800,000 of Bonds for $785,000.The