If a bond payable is sold (issued) at a premium, the amount of the carrying value (the long-term liability) reported on the subsequent statements of ﬁnancial position does which of the following?
A) Remains constant.
B) Decreases each year.
C) Increases each year.
D) Changes from year to year depending upon the market rate of interest each year.

Question

Quizplus · Accepted Answer

When a bond is issued at a premium, the carrying value decreases each year. This is because the premium is amortized over the life of the bond, reducing the carrying value to its face value by the maturity date.

If a Bond Payable Is Sold (Issued) at a Premium