HomeworkLib
Question

Which of the following statements is NOT true? Multiple Choice Amortizing a discount reduces interest expense...

Which of the following statements is NOT true?

Multiple Choice

  • Amortizing a discount reduces interest expense

  • Amortizing a premium reduces the carrying value of a bond

  • A discount reduces the carrying value of a bond

  • Amortizing a discount increases the carrying value of a bond

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Statement A is not correct.

When we amortize a discount on bond, we transfer some part of bond discount to interest expense. Every year (Upto the amortization period) the debit balance of discount get reduced and the debit balance of interest expense in increased. Hence interest expense will not be reduced as a result on amortisation of discount on bond. Instead it will increase.

0 0
Add a comment
Know the answer?
Add Answer to:
Which of the following statements is NOT true? Multiple Choice Amortizing a discount reduces interest expense...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • which of the following statements are correct? - A premium results when the bond's issue price...

    which of the following statements are correct? - A premium results when the bond's issue price is greater than its face value Or - the amortization of the premium increases the bond interest expense Or - the amortization of the discount reduces the bond interest expense

  • Which of the following statements about bonds is correct? a.The cash interest paid is calculated as...

    Which of the following statements about bonds is correct? a.The cash interest paid is calculated as the bond face value × the face rate of interest. b.The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount. c.The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium. d.The...

  • Which of the following statements is TRUE. Multiple Choice Compound interest pays Interest on not only...

    Which of the following statements is TRUE. Multiple Choice Compound interest pays Interest on not only the original amount invested but also on any interest payments previously earned. Compound Interest applies to consumer loans but not to investments Compound interest automatically takes into account the impact inflation will have on the value of an investment O Compound Interest normalizes the expected rate of returns taking into account the level of risk involved. Specialization is typically not complete because Multiple Choice...

  • Compute Bond Proceeds, Amortizing Discount by Interest Method, and Interest Expense Boyd Co. produces and sells...

    Compute Bond Proceeds, Amortizing Discount by Interest Method, and Interest Expense Boyd Co. produces and sells aviation equipment. On the first day of its fiscal year, Boyd Co. issued $60,000,000 of five-year, 10% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 5 and Exhibit 7. Round to the nearest dollar. $ b....

  • Compute Bond Proceeds, Amortizing Discount by Interest Method, and Interest Expense Boyd Co. produces and sells...

    Compute Bond Proceeds, Amortizing Discount by Interest Method, and Interest Expense Boyd Co. produces and sells aviation equipment. On the first day of its fiscal year, Boyd Co. issued $30,000,000 of five-year, 12% bonds at a market (effective) interest rate of 14%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 5 and Exhibit 7. Round to the nearest dollar. b. The...

  • Help Save & Exit An amortization schedule for a bond issued at a premium: Multiple Choice...

    Help Save & Exit An amortization schedule for a bond issued at a premium: Multiple Choice Has a carrying value that increases over time o Is contained in the balance sheet o () is a schedule that reflects the changes in the carry e bond over its term to maturity ) All of the other answer choices are correct Prev 5 of 30 !! Next > Help Save Which of the following statements is correct? Multiple Choice O Bonds are...

  • ACC206: Financial Reporting 3.0 1. When bonds are sold at a discount and the effective interest...

    ACC206: Financial Reporting 3.0 1. When bonds are sold at a discount and the effective interest method is used, at each subsequent interest payment date, which of the following is true? a. The cash paid for interest is less than the effective interest expense. b. The cash paid for interest is equal to the effective interest expense. c. The cash paid for interest is more than if the bonds had been sold at a premium. d. The cash paid for...

  • Some companies may use the straight-line method of computing interest expense and amortizing the discount or...

    Some companies may use the straight-line method of computing interest expense and amortizing the discount or premium, rather than the effective interest method. i) what is the difference between the two methods? ii) Why is the straight-line method NOT considered acceptable under US GAAP? iii) Why do some companies use it anyway, even though it is not acceptable?

  • Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount Journal Instructions Chart...

    Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount Journal Instructions Chart of Accounts Final Question Instructions On July 1, 20Y1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash...

  • Which of the following statements is correct? Multiple Choice There are almost always small differences between...

    Which of the following statements is correct? Multiple Choice There are almost always small differences between the stated rate and the market rate when bonds are issued. The market rate of interest has no bearing on the selling price of the bonds. If the stated rate of interest on a bond is equal to the market rate of interest, then the bond will sell at a premium price. ooo The market rate of interest refers to the interest rate that...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT