Question

When the discount on bonds payable is amortized, the carrying value of the bonds:

a) will always remain unchanged
b) will decrease
c) may increase or decrease depending on the face value of the bonds
d) will increase

Answer 1

When the discount on bonds payable is amortized, the carrying value of the bonds will increase.

Step-by-step explanation:

When the discount on bonds payable is amortized, the carrying value of the bonds will increase. Discount on bonds payable represents the difference between the face value of the bonds and the amount received when the bonds were issued. This discount is amortized over the life of the bonds, meaning it is gradually reduced over time. As the discount is amortized, the carrying value of the bonds increases because the discount is added to the bonds' face value. The carrying value represents the amount at which the bonds are reported on the company's financial statements.