Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

11. Long Term Liabilities

Premium on Bonds

Financial Accounting

11. Long Term Liabilities

Premium on Bonds

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Multiple Choice

The carrying value (i.e. book value) of Bonds Payable is equal to:

Bonds Payable + Accrued Interest

Bonds Payable – Premium on Bonds Payable

Bonds Payable – Amortization of Premium on Bonds Payable

Bonds Payable – Discount on Bonds Payable

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Verified step by step guidance

Understand the concept of carrying value: The carrying value of a bond is the net amount at which the bond is reported on the balance sheet. It is the face value of the bond adjusted for any unamortized premium or discount.

Identify the components involved: In this problem, we are dealing with Bonds Payable, Premium on Bonds Payable, and Discount on Bonds Payable.

Recognize the effect of a premium: A premium on bonds payable occurs when bonds are issued for more than their face value. This premium is amortized over the life of the bond, reducing the carrying value.

Recognize the effect of a discount: A discount on bonds payable occurs when bonds are issued for less than their face value. This discount is amortized over the life of the bond, increasing the carrying value.

Apply the correct formula: The carrying value of Bonds Payable is calculated as Bonds Payable minus any unamortized Discount on Bonds Payable. This reflects the true liability of the bond on the balance sheet.