Business, 20.02.2020 22:47 monstax6

On January 2, Year 4, Nast Co. issued 8% bonds with a face amount of $1 million that mature on January 2, Year 10. The bonds were issued to yield 12%, resulting in a discount of $150,000. Nast incorrectly used the straight-line method instead of the effective-interest method to amortize the discount. How is the carrying amount of the bonds affected by the error?
At Dec. 31, Year 4At Jan. 2, Year 10
A. Overstated
No effect
B. Understated
No effect
C. Understated
Overstated
D. Overstated
Understated

Answers: 2

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