Question

How is the carrying value of a bond issued at a discount calculated?

A. by adding the annual interest payments to the balance in the Bonds Payable account
B. by multiplying the face value of the bond by the annual interest rate of the bond
C. by adding the balance of the premium account to the balance of the Bonds Payable account
D. by subtracting the balance of the discount account from the balance of the Bonds Payable account

Answer 1

The carrying value of a bond issued at a discount is calculated by subtracting the balance of the discount account from the balance of the Bonds Payable account. Therefore, the correct option is D.

Step-by-step explanation:

The carrying value of a bond issued at a discount is calculated by subtracting the balance of the discount account from the balance of the Bonds Payable account.

For example, if a bond is issued at a discount of $500 and the Bonds Payable account has a balance of $10,000, the carrying value of the bond would be $10,000 - $500 = $9,500.