Question

The carrying amount of bonds is equal to:

a) the face value of the bonds plus the premium on bonds payable
b) the face value of the bonds less the discount on bonds payable
c) the face value of the bonds less the premium on bonds payable
d) the face value of the bonds plus the premium on bonds payable or the face value of the bonds less the discount on bonds payable

Answer 1

The correct answer is d) the face value of the bonds plus the premium on bonds payable or the face value of the bonds less the discount on bonds payable, as the carrying amount of a bond includes adjustments for premiums or discounts.

Step-by-step explanation:

The carrying amount of a bond can be calculated in two different ways depending on if a bond premium or bond discount exists:

• If a bond is sold at a premium, the carrying amount is equal to the face value of the bonds plus the premium on bonds payable.
• If a bond is sold at a discount, the carrying amount is equal to the face value of the bonds less the discount on bonds payable.

Therefore, the correct answer to the question is d) the face value of the bonds plus the premium on bonds payable or the face value of the bonds less the discount on bonds payable.