When a bond is issued at a discount the carrying value of the bond at maturity will be?

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The carrying value of a bond is not equal to the bond payable amount unless the bond was issued at par. When a bond is issued at a premium, the carrying value is higher than the face value of the bond. When a bond is issued at a discount, the carrying value is less than the face value of the bond.

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

The carrying value equals the face value of the bond plus the remaining premium to be amortized. Use the equation \$1,000 + \$64 = \$1,064. Calculate the carrying value of a bond sold at a discount using the same method. Subtract the unamortized discount from the face value.

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What is the carrying value of bonds at maturity?

The carrying value of bonds at maturity will always equal their par value. In other words, par value (nominal, principal, par or face amount), the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.

When bonds are issued at a discount below face amount the carrying value and the corresponding interest expense increase over time?

When bonds are issued at a discount (below face amount), the carrying value and the corresponding interest expense increase over time. Interest expense on bonds payable is calculated as the: Carrying value times the market interest rate. A bond issue with a face amount of \$500,000 bears interest at the rate of 7%.

What does it mean when a bond is issued at a discount?

Key Takeaways. Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures.

What is a bond carrying value?

The carrying value of a bond refers to the net amount between the bond’s face value plus any un-amortized premiums or minus any amortized discounts. … Premiums and discounts are amortized over the life of the bond, therefore book value equals par value at maturity.

When bonds are issued at a discount what happens to the carrying value and interest expense?

if bonds are issued at a discount, over the life of the bonds, interest expense will: Decrease.

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When bonds are issued the carrying book value is always the par value of the bond?

Definition: The carrying value of a bond is the par value or face value of that bond plus any unamortized premiums or less any unamortized discounts. The net amount between the par value and the premium or discount is called the carrying value because it is reported on the balance sheet.

How would the carrying value of bonds payable change over time for bonds issued at a discount?

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? Carrying value and interest expense increase. Carrying value and interest expense decrease.

How do you find the carrying value?

To calculate the carrying value or book value of an asset at any point in time, you must subtract any accumulated depreciation, amortization, or impairment expenses from its original cost.

When a bond is issued at a discount at what value is it reported on the balance sheet?

The premium or the discount on bonds payable that has not yet been amortized to interest expense will be reported immediately after the par value of the bonds in the liabilities section of the balance sheet.

When bonds are issued at a discount the borrower must pay more at maturity than the amount originally received true or false?

When bonds are issued at a discount, the borrower must pay more at maturity than the amount originally received. The account Discount on Bonds Payable actually represents interest expense and will be amortized over the life of the bond.

When a bond is issued at a discount is the market interest rate higher or lower than the contract interest rate on the bond?

A discount bond is offered at a lower price than the prevailing market rate. Buying the bond at a discount means that investors pay a price lower than the face value of the bond. However, it does not necessarily mean it offers better returns than other bonds. Let take an example of a bond with a \$1,000 face value.

Why bonds are issued at discount and premium?

So, when interest rates fall, bond prices rise as investors rush to buy older higher-yielding bonds and as a result, those bonds can sell at a premium. Conversely, as interest rates rise, new bonds coming on the market are issued at the new, higher rates pushing those bond yields up. … So, those bonds sell at a discount.

When a bond sells at a discount quizlet?

The right to receive \$1,000 at maturity. -Allocates a portion of the total discount to interest expense each interest period. -Increases the market value of the Bonds Payable. -Decreases the Bonds Payable account.

When bonds are issued at a premium?

When a bond is issued at a premium, that means that the bond is sold for an amount greater than the bond’s face value. This generally means that the bond’s contract rate is greater than the market rate.