A ten-year bond was issued in 2020 at a discount with a call provision to retire the bonds. When the bond issuer exercised the call provision on an interest date in 2022, the carrying value of the bond was less than the call price. The amount of bond liability removed from the accounts in 2022 would be the
A) call price.
B) maturity value.
C) carrying value.
D) face amount plus unamortized discount.

Question

Quizplus · Accepted Answer

When a bond issuer exercises a call provision, they must pay the call price, which is typically higher than the carrying value of the bond. The carrying value of the bond is the amount that is recorded on the balance sheet and represents the remaining amount of the bond liability after amortizing any discount or premium. Therefore, the amount of bond liability removed from the accounts in 2022 would be the carrying value of the bond. Options A, B, and D are incorrect because they either represent a higher amount than the carrying value or include unamortized discount, which has already been accounted for in the carrying value.

A Ten-Year Bond Was Issued in 2020 at a Discount