10 NEED HELP ASAP If bonds are originally sold at a discount using the straight-
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Question
10 NEED HELP ASAP
If bonds are originally sold at a discount using the straight-line amortization method:
Interest expense in the earlier years of the bond's life will be less than the interest to be paid.
Interest expense in the earlier years of the bond's life will be the same as interest to be paid.
Unamortized discount is subtracted from the face value of the bond to determine its carrying value.
Unamortized discount is added to the face value of the bond to determine its carrying value.
Interest expense in the earlier years of the bond's life will be less than the interest to be paid.
Interest expense in the earlier years of the bond's life will be the same as interest to be paid.
Unamortized discount is subtracted from the face value of the bond to determine its carrying value.
Unamortized discount is added to the face value of the bond to determine its carrying value.
Explanation / Answer
when a bond is issued at discount and discount is amortized by straight line method, the interest expense will be same thoughout the bond's life. The interest expense will be the the sum of interest paid plus the discount amortized.
So the first two statements are not correct.
As the Bond is issued at discount , the carrying value of bond is found by substracting unamortized discount from the face value of the bond.
So the third statement that "Unamortized discount is subtracted from the face value of the bond to determine its carrying value." is Correct.
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