Quiz 10: Reporting and Interpreting Bond Securities
A Bond Issued at a Discount Will Pay More Cash
A bond issued at a discount will pay more cash for interest over the life of the bond than the total interest expense recognized over the life of the bond.
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The journal entry for the cash payment of interest on a bond issued at a discount will result in an increase in the book value of the bond liability.
Either straight-line or effective-interest amortization may be used for bond premiums or discounts regardless of the amounts involved.
The journal entry for the cash payment of interest on a bond issued at a premium results in an increase in the book value of the bond liability.
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