Final answer:
The amortized cost of the 5-year, 8% bond purchased by Nesbo Co. on the maturity date is $200,000. This accounts for the bond's purchase at a discount and the full amortization of this discount over the bond's life by the maturity date.
Step-by-step explanation:
The subject of this question is the calculation of the amortized cost of a bond on the maturity date, focusing on a scenario in which Nesbo Co. purchases a 5-year, 8% bond with a face value of $200,000, which was bought at $184,557 to yield 10%. Interest is paid semi-annually, and because the interest rate of the bond (8%) is less than the yield rate (10%), the bond was bought at a discount.
As the bond matures, the discount on the bond (the difference between the purchase price and the face value) is amortized, or gradually taken into account as interest income over the life of the bond. By the maturity date on January 1, 2028, the amortized cost will equal the bond's face value, meaning that all the discount has been fully amortized.
Therefore, the amortized cost of the bond on the maturity date will be $200,000, which is the bond's face value. This accounts for the adjusted purchase price through the accumulation of the discount amortized over the bond's term to maturity