If bonds were initially issued at a premium,the carrying value of the bonds on the issuer's books will
A)decrease as the bonds approach their maturity date.
B)increase as the bonds approach their maturity date.
C)remain constant throughout the bonds' life.
D)fluctuate throughout the bonds' life.

Question

Quizplus · Accepted Answer

If bonds were initially issued at a premium, the carrying value of the bonds on the issuer's books will decrease as the bonds approach their maturity date. This is because the premium amount will gradually decrease to zero as the bonds near their maturity and will be fully amortized by the end of the bond term. Therefore, the issuer will gradually amortize the premium amount over the life of the bond, which results in a lower carrying value of the bond.

If Bonds Were Initially Issued at a Premium,the Carrying Value