 Hello, in this lecture we will define carrying value of bonds support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it according to fundamental accounting principles wild 22nd edition the definition of carrying value of bonds is net amount at which bonds are reported on the balance sheet equals the par value of the bonds less any unamortized discount plus any unamortized premium also called carrying account or book value when we're thinking about bonds we could be thinking about the issuer of the bonds or purchasing of the bonds we often take a purchasing of bonds as a form of investment however we're going to think about it from this case in this example as the issuing of the bond so we are a corporation we can issue the bond as a form of revenue generation a form of cash flow similar to a note us receiving money for the bond the bond being a promise to pay at some point in the future there could be some different terms to the bond but one of the main characteristics of a bond is that the interest rate is typically going to be on the bond as is the carrying amount meaning the amount that will be due at the end of the term of the bond so in this case we have the face amount at 240,000 of bonds that we're going to issue now we cannot just ask for 240,000 dollars now and promise to repay the 240 as we would with a note because the varying factor within a note typically would be the interest rate but in this case we're saying hey the interest rates already on the bond it's not we're going to say it's 6% so if the bond has 6% interest rate and if that is different than the market rate then we're going to have a problem here we're going to have to do something in order to sell our bonds if we cannot adjust the interest rate what are we going to have to adjust the amount of money that we're going to receive for those bonds so the difference between bonds and notes is that in order to adjust for market forces in the case of notes we usually adjust the interest rate in the case of bonds we're typically going to adjust the amount of money we're going to receive in our example here the market rate is going to be higher than the rate that we have meaning people could put money somewhere else and get a higher rate what does that mean in terms of our issue price it's going to have to be lower we're going to have to accept more money I mean less money than the face value of the bond in this case because we're offering a lower interest rate which is already on the bond so in our case how are we going to record this we're going to say that we are issuing the bond for 198 484 it's lower than the face amount we're not going to calculate how to get to that amount at this point but we're recognizing the fact that because the rate of the bond is lower than the market rate market rate not being something on the bond something that we would need to know through the market because of that we're getting less money than the face value of the bond we're going to put the bond on the books as a liability in a similar way as we would if it was a loan meaning we owe the money back and of course we have a difference between the debits and credits we're going to shore that up with the discount so we were to record this we would reduce the cash I mean we would increase the cash for the issuance we put the bonds on the books as a credit we owe that money back in the future and then we have this discount notice it's a liability notice it has a debit balance what that means is that we owe back the entire bond of the 240 however when the the carrying value of the bonds will be the 240,000 minus the 41 516 and that's going to be the carrying amount amount of 198 484 that difference being due to the fact that the rates are different here so what we're going to do over the life of this bond is to expense this amount out lower it at some in some fashion in and expense it in the form of interest expense over the life of the bond