Answered: 1. When a company amortizes a discount,…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 7Q: In the amortization table, how is the amortization of discount of premium computed?

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1. When a company amortizes a discount, interest expense is:

Group of answer choices

less than the cash payment for interest

the same as the cash payment for interest

cannot be determined

greater than the cash payment for interest

2. When a company amortizes a premium, interest expense is:

Group of answer choices

cannot be determined

greater than the cash payment for interest

the same as the cash payment for interest

less than the cash payment for interest

3. Which method of amortizing a discount will generate the same interest expense each year over the life of a bond?

Group of answer choices

Coupon amortization

Market amortization

Straight-line amortization

Effective amortization

4. A bond has a face value of $100,000 and sold for $98,000. How much of the discount will be amortized in the first year if the company uses straight-line amortization and the bond has a 10 year life?

Group of answer choices

$200

$2,000

$9,800

$10,000

5. A bond has a face value of $100,000 and sold for $98,000. The stated interest rate is 5%. The market interest rate is 6%. The bond has a ten year life. How much will interest expense be in the first year of the bond's life?

Group of answer choices

$6200

$5200

$4800

$5800

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