Accounting Chapter 9

$899,326.00

Based on the information, work out the price that the company received for the issue of the bonds On January 1 2015. (hint "at 99" means the $ price for every $100 of bonds issued)

The carrying value commences at the issue proceeds and progresses evenly up to the maturity date, ie. one fifth of the discount is added to the carrying value at the end of each of the five years.

http://www.wikihow.com/Calculate-Carrying-Value-of-a-Bond

Understand amortization. Amortization is an accounting method that systematically reduces the cost of an asset over time. It spreads the effect of a bond discount or premium over the term of the bond. The amortized discount or premium is recorded as an interest expense on financial statements. By the time the bond matures, the carrying value and the face value of the bond are equal.[5]
For example, suppose a company sells a $200,000, 10%, 5 year bond at a $2,000 discount. The company receives $198,000 from investors. This is recorded on financial statements as a liability. The $2,000 is an asset. It is amortized, or recorded on financial statements in increments over the term of the bond. The difference between the face value of the bond and the unamortized portion of the discount at any point in time is the carrying value.