Salem Company has outstanding $100 million of 7% bonds, due in 7 years, and callable at 104. The bonds were issued at par and are selling today at a market price of 94. The amortization of a bond discount: A. Increases the carrying value of a bond and increases interest expense. B. Increases the carrying value of a bond and decreases interest expense. C. Decreases the carrying value of a bond and increases interest expense. D. Decreases the carrying value of a bond and decreases interest expense.
Salem Company has outstanding $100 million of 7% bonds, due in 7 years, and callable at 104. The bonds were issued at par and are selling today at a market price of 94. The amortization of a bond discount: A. Increases the carrying value of a bond and increases interest expense. B. Increases the carrying value of a bond and decreases interest expense. C. Decreases the carrying value of a bond and increases interest expense. D. Decreases the carrying value of a bond and decreases interest expense.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Salem Company has outstanding $100 million of 7% bonds, due in 7 years, and callable at 104.
The bonds were issued at par and are selling today at a market price of 94.
The amortization of a bond discount:
A. Increases the carrying
B. Increases the carrying value of a bond and decreases interest expense.
C. Decreases the carrying value of a bond and increases interest expense.
D. Decreases the carrying value of a bond and decreases interest expense.
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