If bonds are issued at a premium the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

Question

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When bonds are issued at a premium, it means that the market interest rate is lower than the coupon rate on the bond. Therefore, investors are willing to pay more than the face value of the bond to receive the higher coupon payments. As a result, the carrying value of the bonds will be greater than the face value for all periods prior to maturity, as the premium paid by investors is amortized over the life of the bond.

If Bonds Are Issued at a Premium the Carrying Value