How would the carrying value of bonds payable change over time for bonds issued at a discount and for bonds issued at a premium?
A) Decrease for bonds issued at a discount and decrease for bonds issued at a premium.
B) Decrease for bonds issued at a discount and increase for bonds issued at a premium.
C) Increase for bonds issued at a discount and decrease for bonds issued at a premium.
D) Increase for bonds issued at a discount and increase for bonds issued at a premium.
Answer: C
The carrying value, using the effective interest method, would increase each year:
A) If the bonds were sold at a discount.
B) If the bonds were sold at a premium.
C) If the bonds were sold at either a discount or a premium.
D) The carrying value of bonds will never increase.
Answer: A
The carrying value, using the effective interest method, would decrease each year:
A) If the bonds were sold at a discount.
B) If the bonds were sold at a premium.
C) If the bonds were sold at either a discount or a premium.
D) The carrying value of bonds will never decrease.
Answer: B
