Definition of Book Value of Bonds Payable
The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or combination of the following amounts, all of which are bond-related liability accounts:
- Face or maturity value of the bonds (a credit balance in the account Bonds Payable)
- Unamortized discount (a debit balance in the contra-liability account Discount on Bonds Payable)
- Unamortized premium (a credit balance in the adjunct-liability account Premium on Bonds Payable)
- Unamortized bond issue costs (a debit balance in the contra-liability account Bond Issue Costs)
It’s important that the discount, premium, and issue costs have been amortized properly up to the moment when the book value of the bonds is needed.
Example of Book Value of Bonds Payable
Assume that as of December 31, the amortizations are up to date and the general ledger accounts had the following balances:
- Bonds Payable had a credit balance of $10,000,000
- Bond Discount had a debit balance of $240,000
- Bond Issue Costs had a debit balance of $130,000
The book value (or carrying value) of the bonds payable at December 31 was $9,630,000.
