The amortization of a premium on bonds payable Group of answer choices increases the carrying amount of the bond. decreases the balance of the bonds payable account. increases the amount of interest expense reported. increases the cash payment to bondholders.
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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 determined16. Under the straight-line amortization method, interest expense on a bond sold at a premium is equal to the a. interest paid plus bond premium amortizationb. interest rate times the book value of the bondsc. interest rate times the face value of the bondsd. interest paid minus bond premium amortization12. How would the amortization of discount on bonds payable affect the carrying amount of bond and net income, respectively? * a. Increase and Descrease b. Increase and Increase c. Decrease and Increase d. Decrease and Decrease
- 21.1 Evaluate the following statements: S1. Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to the nominal rate multiplied by the beginning-of-period carrying amount of the bonds. S2. ABC is using an effective interest method in amortizing any premium or discount arising from the bond issue. In case the entity incurs printing costs and legal fees associated with the issuance of bonds, the total costs may be lumped into the discount, or netted against the premium. a. False, False b. True, False c. True, True d. False, True16. Bond issue costs a. should be amortized by the straight-line method to interest expenseb. should be included in bond discount or subtracted from bond premium and amortized by the effective-interest methodc. should be subtracted from bonds payable on the balance sheetd. should not be amortized and should be written off at bond retirement9.An entity uses the effective interest method in amortizing bond premium. Which of the following is incorrect regarding the bond premium amortization? Amortization increases over the life of the bonds. Periodic interest expense is greater than periodic interest payments. Periodic interest expense decreases over the life of the bonds The carrying amount of the bonds decreases over the life of the bonds
- q7 Under the effective interest method of amortizing bond premium on term bonds, A. interest expense remains the same for each period.B. interest rate varies from period to period.C. interest expense increases each period.D. interest expense decreases each period.5. The premium on bonds payable account is shown on the statement of financial position as a.a contra asset. b.a subtraction from a long-term liability. c.an addition to a long-term liability. d.a reduction of an expense.18. The use of the effective-interest method to amortize a discount associated with the acquisition of an investment in bonds results in a. the recognition of more interest revenue over the life of the investment than the use of the straight-line method b. the recognition of a constant amount of interest revenue each period c. the recognition of less interest revenue over the life of the investment than the use of the straight-line method d. the recognition of a varying amount of interest revenue each period
- (34) Under the effective - interest method of amortization, the bond cash payment on each interest date is calculated by multiplying the: A. Carrying value of the bonds times the effective - interest rate for the appropriate time period. B. Face value of the bonds times the stated interest rate for the appropriate time period. C. Face value of the bonds times the effective - interest rate for the appropriate time period. D. Carrying value of the bonds times the stated interest rate for the appropriate time period.The discount on a bond payable becomesa. additional interest expense in the year the bonds are sold.b. a reduction of interest expense in the year the bonds mature.c. a reduction in interest expense over the life of the bonds.d. additional interest expense over the life of the bonds.