Answer: This could be explained as below :-
Explanation:
A. Bonds were issued for $97 with par value of $100, hence they were issued on discount.
B. Market rate was higher, as company issued bonds on discount.
C. Amortization = $2,000,000 * 7.5% * 10/12 = $125,000
Discount = $60,000/6 * 10/12 = $8,333
Total interest expense = $125,000 + $8,333 = $133,333
D. Carrying value = $2,000,000 - $51,667 ($60,000 - $8,333) =$1,948,333
