Carrying Value Is Computed Annually When a Bond Is Issued

question 177

Multiple Choice

Carrying value is computed annually when a bond is issued for other than its face value.For a bond issued at a premium,how will this component change as the bond approaches maturity?

• A)Decrease
• B)Increase
• C)Remain constant
• D)Not enough information given to decide

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Definitions:

Total Contribution Margin

The amount left over from sales revenue after variable expenses have been deducted; it contributes to covering fixed costs and generating profit.

Fixed Costs

Charges that stay the same no matter the scale of production or sales, like rent, salaries, and insurance.

Variable Costs

Expenses that vary depending on the amount of products or services a company generates.

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with changes in activity level but not in the same proportion.