Question

The carrying value of bonds is calculated by

a. adding the premium on bonds payable account balance to the bonds payable account balance.

b. subtracting the premium on bonds payable account balance from the bonds payable account balance.

c. adding the discount on bonds payable account balance to the bonds payable account balance.

d. adding the bonds payable account balance to the bond interest payable account balance.

Answer 1

Answer: option A

Carrying value of a bond is determined by the net amount between the bonds face value (+) any unamortized premium (-) any amortized discount.

If a bonds interest rate is above the market rate, then the bond sells at premium.

If a bonds interest rate is below the market rate, then the bond sells at discount.

If a bonds interest rate is equal to the market rate, then the bond sells at par.

SUMMARY

The carrying value of the bond is calculated by adding the premium on bonds payable account balance to the