11. When bonds are issued at a premium, the interest expense for the period is the amount of the interest payment for the period a.plus the discount amortization for the period. b.minus the premium amortization for the period. c.minus the discount amortization for the period. d.plus the premium amortization for the period.
11. When bonds are issued at a premium, the interest expense for the period is the amount of the interest payment for the period a.plus the discount amortization for the period. b.minus the premium amortization for the period. c.minus the discount amortization for the period. d.plus the premium amortization for the period.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 6PEA
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Question
11.
When bonds are issued at a premium, the interest expense for the period is the amount of the interest payment for the period
a.plus the discount amortization for the period.
b.minus the premium amortization for the period.
c.minus the discount amortization for the period.
d.plus the premium amortization for the period.
Expert Solution
Step 1
Bonds payable are one of the sources of finance and are shown as liability. If the interest rate is equal to the market rate, then the bonds are issued at face value.
If the interest rate is less than the market rate, then the bonds are issued at discount.
If interest rate is more than the market rate, then the bonds are issued at premium.
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