- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 25. Non-Current (Long-term) Liabilities
- Subject 1. Accounting for Bond Issuance, Bond Amortization, Interest Expense, and Interest Payments
CFA Practice Question
Kiawah Corp. sold bonds at a price of 96.2 plus accrued interest. At the time of this issuance, the carrying value of the bonds would be less than:
Face Value of the Bonds : Cash Received by Kiawah (ignore fees)
A. Yes : Yes
B. Yes : No
C. No : Yes
Explanation: Since the carrying value (face value less discount) at issuance is equal to the purchase price, the carrying amount would be less than both the face value (price of 100) and the cash received, since the latter includes accrued interest.
User Contributed Comments 2
| User | Comment |
|---|---|
| murli | Carrying value of bond sold below Par < Par Carrying value < Cash received as cash includes interest accrued. |
| thekobe | accrued interest is the key |