Which of the following statements about a 10-year bond issued at a discount is not correct?
A)At the end of ten years,the balance in the Discount on Bonds Payable account will equal zero.
B)At the end of ten years,the carrying value will equal the face value.
C)At the end of ten years,the total interest expense will reflect the market rate of interest.
D)At the end of ten years,the total interest expense will equal the total interest paid.

Question

Quizplus · Accepted Answer

When bonds issue at a discount,the bond issuer receives less cash on the issue date than it repays on the maturity date.The discount represents an extra cost of borrowing,over and above each interest payment.For accounting purposes,we match the extra borrowing cost to the periods in which interest is recorded.This amortization causes the Interest Expense to be more than the interest payment and,at the same time,causes Discount on Bonds Payable to decrease each period.

Which of the Following Statements About a 10-Year Bond Issued