Amortization of bond premium decreases interest expense, while amortization of discount increases bond interest expense. True of False
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Amortization of bond premium decreases interest expense, while amortization of discount increases bond interest expense. True of False
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- When a bond sells at a discount, the carrying value ________ after each amortization entry. A. increases B. decreases C. stays the same D. cannot be determinedWhen 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?Will the amortization of Discount on Bonds Payable result in a higher or lower Bond Interest Expense? Explain.
- true or false The effective interest technique is used to account for a discount on a bond due.Will the amortization of Discount on Bonds Payableincrease or decrease Bond Interest Expense? Explain.When bonds are redeemed before maturity, how is the gain or loss onredemption determined? Why does the calculation differ for bondsissued at face value, at a premium, and at a discount?
- 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 bondsWhen 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 bondsA premium occurs when the issue price of a bond is above its face amount. True or False True False
- If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest rateIf bond issuance costs are incurred, which of the following is always true? None of the other choices It will result to a discount It will result to a premium It will result to direct loss on the income statementIf bonds issue at a discount, is the stated interest rate less than, equal to, or more than the market interest rate? Explain.
