If bonds were initially issued at a discount, the carrying value of the bonds on the issuer's books will

Question

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When a bond is issued at a discount, it means that the bond is sold for less than its face value. Over the life of the bond, the issuer must account for this discount by gradually increasing the carrying value of the bond to reach its face value by the time the bond matures. This process is known as the amortization of the bond discount.
The amortization of the discount is typically done using the effective interest method or the straight-line method, depending on accounting policies and regulations. Under the effective interest method, the amount of interest expense recognized in each period is based on the bond's carrying value at the beginning of the period and the effective interest rate. This results in a varying amount of interest expense and a corresponding increase in the carrying value of the bond over time. The straight-line method, on the other hand, recognizes the same amount of interest expense and increase in carrying value in each period until maturity.
Regardless of the method used, the carrying value of the bond will increase over time as the discount is amortized, and the bond's book value will eventually equal its face value at maturity. Therefore, the correct answer is:
b. increase as the bonds approach their maturity date.

If Bonds Were Initially Issued at a Discount, the Carrying