When bonds are issued at a discount, the interest expense for the period is the amount of the interest payment for the period a.minus the premium amortization for the period. b.plus the discount amortization for the period. c.plus the premium amortization for the period. d.minus the discount amortization for the period.

When bonds are issued at a discount, the interest expense for the period is the amount of the interest payment for the period a.minus the premium amortization for the period. b.plus the discount amortization for the period. c.plus the premium amortization for the period. d.minus the discount amortization for the period.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.1E

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When 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.
When 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.
11. 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 amortization
(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.
4. Compute the annual cost for interest and redemption of these 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
10. The bond interest expense reflected on the income statement should reflect an amount based on the a. effective interest rateb. stated interest ratec. nominal interest rated. face interest rate
9. Interest expense recognized each period on zero-coupon bonds, sold at a discount, is equal to the a. credit to Cashb. difference between the cash payment and the discount amortizationc. credit to Discount on Bonds Payabled. sum of the cash payment and the discount amortization
When 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.
1. 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…
12. 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
Assuming the bonds are issued at a discount, explain how each column in an amortization schedule is determined. When bonds are issued at a premium, how does the amortization schedule differ?