Final answer:
When a bond is issued at a discount, amortizing the discount will decrease the discount balance and increase the carrying value of the bond. When the bond matures, the carrying value will exceed face value.
Step-by-step explanation:
When a bond is issued at a discount, it means that the bond is sold for less than its face value. To amortize the bond discount, the discount balance will decrease and the carrying value of the bond will increase. When the bond matures, the carrying value will exceed the face value.
For example, let's say a bond with a face value of $1,000 is issued at a discount and sold for $900. Each year, a portion of the discount is amortized, meaning it is gradually reduced. This reduces the discount balance. At the same time, the carrying value of the bond increases by the amount of the amortized discount. So, as the bond approaches maturity, the carrying value will exceed the face value of $1,000.
Therefore, the answer is option C) Increase; Increase; Exceed.