newconnec Connect Ch. 10 Quiz 6 Saved If an issuer sells bonds at a premiunm 16
ID: 2583913 • Letter: N
Question
newconnec Connect Ch. 10 Quiz 6 Saved If an issuer sells bonds at a premiunm 16 Multiple Choice points The carrying value decreases from the par value to the issue price over the bond's torm. value decreases from the issue price to the par value over the bond's term The carying value of the bond stays constant over time. The carrying value increases from the issue price to the par value over the bond's term. The carrying value increases from the par value to the issue price over the bond's term.Explanation / Answer
If an issuer sells bonds at a premium “the carrying value decreases from Issue Price to the Par Value over the bond’s term”
Issuance of Bonds at premium means the bonds are issued over and above its face value.
Carrying Value is the sum of Face Value of Bonds Payable and the Unamortized Premium on bonds payable.
So, over the bond’s term Premium is amortized and the Unamortized Premium is reduced, resulting the carrying value of the bonds also reduces.
Hence, the correct option is “the carrying value decreases from Issue Price to the Par Value over the bond’s term”
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