Manufacturing Company, an IFRS reporter, issued $1,000,000 par value, 6%, five-year bonds dated January 1, 2016. The bonds pay interest semiannually each June 30 and December 31. Xena received cash of $923,336 when bonds were issued, excluding accrued interest and bond issue costs, on April 30, 2016, to yield an effective interest rate of 9.298%. Bond issue costs were $46,000.

1-A. Discuss the treatment of bond issue costs under IFRS. What is the account or premium on the bond? Begin by selecting the correct statement regarding the treatment of bond issue costs under IFRS.

a. Under IFRS, bond issue costs are added to any discount or premium on the bond and amortized. Therefore, the bond issue costs are subtracted from the cash received on the bond issued to obtain the amount of the bond on which effective interest is computed.

b. Under IFRS, bond issue costs are capitalized into an asset account, unamortized bond issue costs, rather than expensing them. The bond issue costs are amortized over the life of the bond issue. The unamortized balance of the bond issue costs is considered part of the bond's net carrying value. Thus, the net carrying value of the bonds will equal their present value(face value and premium or discount) and any unamortized bond issue costs.

c. Under IFRS, bond issue costs are expensed upon issue of the bond. Therefore, the bond issue costs have no effect on the price of the bond, the premium or discount, or on the computation of effective interest.

d. Under IFRS, bond issue costs are added to the cash received on the bond issued to obtain the amount of the bond on which effective interest is computed.