Instead of effective-interest method to amortize discount

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Reference no: EM13790094

On January 2, 2015, Nast Co. issued 5% bonds with a face amount of $600,000 that mature on January 2, 2025. The bonds were issued to yield 6%, resulting in a discount of $44,630. 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 December 31, 2015 At January 2, 2025

a) Overstated Understated

b) Understated No effect

c) Understated Overstated

d) Overstated No effect

Reference no: EM13790094

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