Sold $1 million in bonds, 20 years at 4% with interest paid semi-annually. The proceeds from the bonds was $975,000
Each of the following was suggested as a possible valuation basis for reporting the bond liability on the balance sheet.
1. $975,625 (proceeds, plus 6 months straight line amortization)
2. $1 million (face value)
3. $1,780,000 (face value plus interest payments)
Evaluate each of the three suggested alternatives for reporting the bond liability in the balance sheet. Give arguments for and against each alternative, taking into consideration the investor and the reporting company.