Asked by Tracy Thich on May 21, 2024
Verified
The interest expense recorded on an interest payment date is increased
A) only if the market rate of interest is less than the stated rate of interest on that date
B) by the amortization of premium on bonds payable
C) by the amortization of discount on bonds payable
D) only if the bonds were sold at face value
Amortization
The gradual reduction of a debt over a period of time through regular payments, which cover interest and principal.
Interest Expense
The cost incurred by an entity for borrowed funds, typically noted on the income statement as a non-operating expense.
- Compute the interest expenditures and amortization for bonds payable.
Verified Answer
LM
LaShay McEachernMay 25, 2024
Final Answer :
C
Explanation :
The interest expense recorded on an interest payment date is increased by the amortization of discount on bonds payable. When bonds are sold at a discount, the stated interest rate is less than the market rate of interest, causing the bond's price to be lower than face value. The discount is then amortized over the life of the bonds, which increases the interest expense recorded on each interest payment date.
Learning Objectives
- Compute the interest expenditures and amortization for bonds payable.
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