The carrying amount of a company's bonds payable is the balance in the company's general ledger account Bonds Payable minus the amount in Discount on Bonds Payable or plus the amount in its account Premium on Bonds Payable. (If there is some unamortized bond issue cost associated with the bond, that would also be part of the carrying amount.)
The carrying amount will be different from the fair market value. For example, the company might depreciate the truck using the straight-line method, but the market value of the truck declines more rapidly in the first year and less rapidly in the later years of the truck's useful life. The market value of the bonds is affected by the daily changes in the market interest rates, whereas the carrying amount is unaffected by the day-to-day changes in the market interest rates.
Studies show that exam questions are a great way to learn and retain important information. Gain access to our 1,700 accounting exam questions (and answers) when you upgrade to PRO.