Final answer:
The carrying value of bonds is the book value, which is the bond's face value adjusted for any unamortized discounts, premiums, or issuance costs on the balance sheet.
Step-by-step explanation:
The carrying value of bonds refers to the net amount at which a bond is recognized on the balance sheet. This amount may be different from its face value or market price due to the amortization of any discounts or premiums involved in the bond transaction.
The correct answer is A. book value.
Explanation in 200 words: Bonds are financial instruments that represent a loan made by an investor to a borrower (typically a corporation or government). A bond's carrying value, also known as its book value, refers to the bond's face value adjusted for any unamortized discount or premium and any unamortized bond issuance costs. It's essentially the value of the bond that appears on the issuer's balance sheet. When a bond is issued at a price lower than its face value, it is sold at a discount, which means that its carrying value is less than its face value and will increase over time toward maturity as the discount is amortized. Conversely, if a bond is issued at a price higher than its face value, it is sold at a premium, and its carrying value will decrease over time as the premium is amortized. Fair value is different; it's the estimated market value of a bond based on current market rates and may vary from the carrying value.