If an interest-bearing note payable is issued at a premium, then the contractual cash payment for interest is
A)greater than interest expense.
B)less than interest expense.
C)equal to interest expense.
D)based on the market rate of interest.

Question

Quizplus · Accepted Answer

When a note payable is issued at a premium, the contractual cash payment for interest is greater than the interest expense. This is because the premium indicates that the stated interest rate on the note is higher than the market interest rate, leading to higher cash payments compared to the actual interest expense recognized in the financial statements.

If an Interest-Bearing Note Payable Is Issued at a Premium