Question

Distinguish between the following values relative to bonds payable:

(a) Maturity value. (c) Market (fair) value.

(b) Face value. (d) Par value.

Short answer

Maturity value	Value payable at the end of life of the bond.
Face value	The value is established by the bond issuer.
Market value	Present value of all the future cash flows from the bonds.
Par value	Value of each bond as stated by the issuing entity.

Step-by-step solution

Definition of Bonds Payable

Bonds payable can be defined as the security issued by the business entity for generating cash for the business entity. These securities are debt securities.

Difference between the values relative to bonds payable

1. Maturity value: Maturity value can be defined as the value payable to the holder at the end of the bond’s life. This value can also be stated as the principal value of the bond payable.
2. Face value: The price of each bond established by the issuer is the face value of the bonds payable. The bonds might be issued at a higher or lower price than the face value.
3. Market (fair) value: Fair value of the bond can be defined as the present value of the bond calculated using the stream of future cash flow. This value is calculated using the discounted rate.
4. Par value: Par value can be defined as the value of a bond as stated by the company issuing it. Discount and premium on the bond are calculated using the par value and issued value of the bond payable.