Below is the question:
On January 2, Year 1, West Co. issued 9% bonds in the amount of $500,000, which mature on January 2, Year 11. The bonds were issued for $469,500 to yield 10%. Interest is payable annually on December 31. West uses the effective interest method of amortizing bond discount. In its June 30, Year 1 balance sheet, what amount should West report as bonds payable?
I would be appreciated if someone can help me explain why the "bond payable" is $470,475. I am taking Becker review. One of the things the instructor emphasized was "bond payable" always booked at the "face amount", which should be $500000 b/c that what will be paid off at the maturity. Although I understand the amortization concept, I just don't understand the question asks for the "face amount" or carrying value of the bond at June 30, year 1. Thanks in advance for any help.