When bonds are issued at a discount, what happens to the carrying value and interest expense overthe life of the bonds?O Carrying value and interest expense decrease.Carrying value decreases and interest expense increases.O Carrying value and interest expense increase.Carrying value increases and interest expense decreases.None of the above.

Bonds can be issued at both at a premium or at a discount. When issue price is lower than face value…

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? O Carrying value and interest expense decrease. O Carrying value decreases and interest expense increases. O Carrying value and interest expense increase. Carrying value increases and interest expense decreases. O None of the above.

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? O Carrying value and interest expense decrease. O Carrying value decreases and interest expense increases. O Carrying value and interest expense increase. Carrying value increases and interest expense decreases. O None of the above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. If bonds are sold at a discount and the straight-line method of amortization is used, interest expense in earlier years will: (A) Exceed what is would have been had the effective interest rate method of amortization been used. (B) Be less than what it would have been had the effective interest rate method of amortization been used. (C) Be the same as it would have been had the effective interest rate method of amortization been used. (D) None of the above.
22) The effective interest rate method of amortizing bonds allocates the same amount of interest expense to each period. TRUE FALSE
Select the correct statement: The value of a premium bond will fall over time, if cost of debt (rd) decreases The value of a discount bond will fall over time, if cost of debt (rd) does not change The value of a discount bond will increase ove time, if cost of debt (rd) does not change The value of a premium bond will increase over time, if cost of debt (rd) does not change