Question

If an issuer sells bonds at a premium: Multiple Choice The carrying value increases from the par value to the issue price over the bond’s term. The carrying value increases from the issue price to the par value over the bond’s term. The carrying value decreases from the par value to the issue price over the bond’s term. The carrying value of the bond stays constant over time. The carrying value decreases from the issue price to the par value over the bond’s term.

Answer 1

Answer:

The carrying value decreases from the issue price to the par value over the bond’s term.

Explanation:

The carrying value of a bond is the par value or face value of that bond plus any unamortized premiums or less any unamortized discounts. The net amount between the par value and the premium or discount is called the carrying value because it is reported on the balance sheet. When a bond is issued at a premium, the carrying value is higher than the face value of the bond.