Issuing bonds at a discount has the effect of increasing interest expense above the face amount of interest.

Name: Issuing bonds at a discount has the effect of increasing interest expense above the face amount of interest.
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Question

Quizplus · Accepted Answer

When a bond is issued at a discount, it means the bond is sold for less than its face value. This discount is amortized over the life of the bond and increases the effective interest expense amount. Therefore, the interest expense will be higher than the face amount of interest.

Issuing Bonds at a Discount Has the Effect of Increasing