When bonds are issued at a discount, what happens to the carrying value and interest expense overthe life of the bonds?O Carrying value and interest expense decrease.Carrying value decreases and interest expense increases.O Carrying value and interest expense increase.Carrying value increases and interest expense decreases.None of the above.

Bonds can be issued at both at a premium or at a discount. When issue price is lower than face value…

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? O Carrying value and interest expense decrease. O Carrying value decreases and interest expense increases. O Carrying value and interest expense increase. Carrying value increases and interest expense decreases. O None of the above.

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? O Carrying value and interest expense decrease. O Carrying value decreases and interest expense increases. O Carrying value and interest expense increase. Carrying value increases and interest expense decreases. O None of the above.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 10RQ: When bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does...

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Does interest expense increase or decrease when a bond premium is amortized?
When bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does the calculation differ for bonds issued at face value, at a premium, and at a discount?
Premium on Bonds Payable has a debit balance. O is a contra account. is deducted from bonds payable on the balance sheet. is considered to be a reduction in the cost of borrowing.
When bonds are issued at a premium the debt declines each period. Explain.
The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.
A debit to Premium on Bonds Payable would least likely be possible on which of the situations? record of interest expense which is lower than the amount paid amortization of a bond premium early retirement of bonds increase in the carrying amount of bonds
When bonds are retired at maturity, ________. A. the carrying value always equals the face value B. the carrying value equals the face value plus the unamortized premium or less the unamortized discount C. the bondholders are paid the face value plus the unamortized premium or less the unamortized discount D. the entry to retire the bonds may include a gain or loss on retirement of bonds
If bonds are issued at a discount and the effective-interest method is used, the amount ofinterest expensea. remains the same over the term of the bonds.b. is less than the cash interest payment.c. increases each period as the bonds approach maturity.d. decreases each period as the bonds approach maturity
Amortizing the discount on bonds payablea. increases the recorded amount of interest expense.b. reduces the semiannual cash payment for interest.c. reduces the carrying value of the bond liability.d. is necessary only if the bonds were issued at more than face value
If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the market interest rate? Explain.
Will the amortization of Discount on Bonds Payable result in a higher or lower Bond Interest Expense? Explain.
When the effective interest method is used, the amortization of the bond premium decreases interest expense each period increases interest expense in some periods and decreases interest expense in other periods increases interest expense each period has no effect on the interest expense in any period