QQuestionAccounting
QuestionAccounting
"Multiple Choice
The carrying value of bonds at maturity always equals:
the amount of cash originally received in exchange for the bonds.
the par value of the bond. the amount of discount or premium.
the amount of cash originally received in exchange for
the bonds plus any unamortized discount or less any premium."
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Answer
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Step 1: Identify the correct answer choice.
The carrying value of bonds at maturity always equals the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium.
Step 2: Analyze the problem components.
Carrying value of bonds at maturity: This is the final book value of a bond when it reaches its maturity date. Amount of cash originally received in exchange for the bonds: This is the initial principal amount received by the issuer of the bond when it was sold. Unamortized discount or premium: This refers to the remaining discount or premium that has not been amortized yet. Amortization is the process of gradually writing off an intangible asset or liability over a set period. In the case of bonds, discount or premium arises when the market price of the bond is different from its face value. If the market price is lower than the face value, there is a discount, and if it's higher, there is a premium.
Final Answer
The carrying value of bonds at maturity always equals the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium.
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