College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
22nd Edition
ISBN: 9781305666160
Author: James A. Heintz, Robert W. Parry
Publisher: Cengage Learning
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Question
Chapter 22, Problem 4MC
To determine
Find the correct option, the option that indicates the effect of amortization of discount.
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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
When bonds are issued at a premium, what happens to the carrying value and interest expense each period over the life of the bonds? a. Carrying value and interest expense increase.b. Carrying value and interest expense decrease.c. Carrying value decreases and interest expense increases.d. Carrying value increases and interest expense decreases.
Which is true when a bond payable is issued at a discount?
Proceeds from issuance is lower than the face amount.
The nominal rate is higher than the effective rate.
The carrying amount of the bonds decreases each period.
The interest paid is higher than the interest expense.
Chapter 22 Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Ch. 22 - A secured bond is one that is backed by specific...Ch. 22 - Prob. 2TFCh. 22 - When bonds are issued at face value, the debit to...Ch. 22 - Prob. 4TFCh. 22 - Prob. 5TFCh. 22 - Bonds that give the holder the option of...Ch. 22 - Prob. 2MCCh. 22 - Prob. 3MCCh. 22 - Prob. 4MCCh. 22 - Bond sinking fund earnings are (a) subtracted from...
Ch. 22 - Prob. 1CECh. 22 - Prob. 2CECh. 22 - Prob. 3CECh. 22 - Prob. 4CECh. 22 - Prob. 5CECh. 22 - Prob. 1RQCh. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - What accounts are affected when bonds are issued...Ch. 22 - Prob. 6RQCh. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - When bonds are redeemed before maturity, how is...Ch. 22 - Prob. 11RQCh. 22 - How should sinking fund earnings be reported on...Ch. 22 - Prob. 13RQCh. 22 - Prob. 1SEACh. 22 - Prob. 2SEACh. 22 - Prob. 3SEACh. 22 - REDEMPTION OF BONDS ISSUED AT FACE VALUE Levesque...Ch. 22 - REDEMPTION OF BONDS ISSUED AT A PREMIUM Brighton...Ch. 22 - REDEMPTION OF BONDS ISSUED AT A DISCOUNT...Ch. 22 - BOND SINKING FUNDS M. J. Adams Corporation pays...Ch. 22 - BONDS ISSUED AT FACE VALUE Ito Co. issued the...Ch. 22 - Prob. 9SPACh. 22 - Prob. 10SPACh. 22 - Prob. 11SPACh. 22 - Prob. 12SPACh. 22 - BONDS ISSUED AT FACE VALUE WITH SINKING FUND...Ch. 22 - Prob. 1SEBCh. 22 - Prob. 2SEBCh. 22 - Prob. 3SEBCh. 22 - Prob. 4SEBCh. 22 - Prob. 5SEBCh. 22 - REDEMPTION OF BONDS ISSUED AT A DISCOUNT Medina...Ch. 22 - Prob. 7SEBCh. 22 - BONDS ISSUED AT FACE VALUE Ramona Arroyo Co....Ch. 22 - Prob. 9SPBCh. 22 - Prob. 10SPBCh. 22 - Prob. 11SPBCh. 22 - BONDS ISSUED AT A DISCOUNT, REDEEMED AT A GAIN...Ch. 22 - BONDS ISSUED AT FACE VALUE WITH SINKING FUND...Ch. 22 - MANAGING YOUR WRITING The business where you work...Ch. 22 - Prob. 1ECCh. 22 - MASTERY PROBLEM Jackson, Inc.s fiscal year ends...Ch. 22 - CHALLENGE PROBLEM This problem challenges you to...
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Similar questions
- 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 determinedarrow_forwardDoes issuing a bond at a discount increase or decrease interest expense over the life of the bond?arrow_forwardWhen the effective-interest method is used, the amount of bond discount amortized eachinterest period is equal to thea. amount of interest expense less the cash paid for interest.b. amount of interest expense plus the cash paid for interest.c. face value of the bond times the market interest rate at the date of issue.d. face value of the bond times the stated interest rate.arrow_forward
- If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true? Group of answer choices Total interest expense will increase over the life of the bonds with the amortization of bond discount. Total interest expense will increase over the life of the bonds with the amortization of bond premium. Total interest expense will decrease over the life of the bonds with the amortization of bond discount. Total interest expense will remain the same over the life of the bonds with the amortization of bond discount.arrow_forwardWhen 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 bondsarrow_forwardWhen a company uses the the effective-interest method to amortize a bond discount amortization, the interest expense is equal to  a) the market rate multiplied by the beginning-of-period carrying amount of the bonds.  b) the market rate of interest multiplied by the face value of the bonds.  c) the stated rate multiplied by the beginning-of-period carrying amount of the bonds.  d) the stated (nominal) rate of interest multiplied by the face value of the bonds.arrow_forward
- Which statement is correct when the effective-interest method is used to amortize bond premium or discount? Group of answer choices  The interest expense increases each period if the bonds were issued at a premium.  The carrying amount at the end of the first year would be highest if the bonds were issued at a discount.  The periodic amortization will increase regardless of whether the bonds were issued at either a discount or a premium.  The periodic amortization will increase or decrease depending on whether the bonds were issued at a premium or at a discount.arrow_forwardWhen bonds are issued at a discount, the interest expense for the period is A. The amount of interest payment for the period minus the discount amortization for the period B. The amount of interest payment for the period plus the discount amortization for the period. C. The amount of interest payment for the period minus the premium amortization for the period D. The amount of interest payment for the period plus the premium amortization for the period.arrow_forward1. The amortization of a discount on an investment in bonds measured at amortized cost  A. Increases the carrying amount of the investment B. Is the excess of interest income over interest received or receivable. C. Is recorded directly to the invesment account D. All of these  2. Which of the following statements is correct for an investment in term bonds that was acquired at a premium?  A. The amortized cost of the bonds increases annually. B. The current and non current portions of the bonds as of the reporting date are reported separately. C. The interest income recognized each year is higher than the amount of interest received/ receivable. D. The effective interest rate is lower than the stated rate of the bonds.  3. The rate used in computing for interest receivable on debt instruments measured at amortized cost is the  A. Nominal rate B. Effective interest rate C. Yield rate D. Celeb rate   4. The transaction costs of acquiring an investment measured at…arrow_forward
- From page 9-4 of the VLN, what causes the bond liability for a bond issued at a premium to decrease each interest payment period? Group of answer choices A. Paying the interest. B. The amortization of the premium. C. Paying the principal. D. The bond liability does not decrease when a bond is issued at a premium.arrow_forwardIf bonds are redeemed on maturity date, any premium or discount    a. Is carried forward and written off in the same manner as that used prior to the maturity date.  b. Should be used to calculate the gain or loss resulting from the maturity of the bonds.  c. Should be written off directly to a bond retirement account as the bond will be redeemed.  d. Will be fully amortized as its amortization period is designed to coincide with the life of the bond issue.arrow_forward. Which of the following are true for a bond maturing on a single date when the effective interest method of amortizing bond discount is used?a.     interest expense as a percentage of the bond’s carrying amount varies from period to periodb.     interest expense increases each six-month period c.     interest expense remains constant each six-month periodd.     effective interest rate is used to compute for the periodic interest   a and b c and d a and d b and carrow_forward
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