On January 1, 2010, Treason Construction Inc. issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30

and December 31. The stated rate is 10% and the market rate is 8%. If Discount/Premium is amortized using the

Straight-line method each interest period, determine the carrying value of the bonds on July 1, 2011.

a. $1,135,000

b. $1,022,500

c. $1,150,000

d. $1,127,500

Please explain how you determined your answer.