Question: On March 1, 2010, Clark Co. issued bonds at a discount. Clark incorrectly used the straight-line method instead of the effective interest method to amortize

On March 1, 2010, Clark Co. issued bonds at a discount.

Clark incorrectly used the straight-line method instead of the effective interest method to amortize the discount.

Clark does not elect the fair value option to report these securities. How were the following amounts, as of December 31, 2010, affected by the error?

Bond carrying amount Retained earnings

a. Overstated Overstated

b. Understated Understated

c. Overstated Understated

d. Understated Overstated

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