When a bond payable is issued at a discount, which of the following would not occur as the bond is amortized each year?
A)Interest expense would increase.
B)The book value of the bonds would increase.
C)The amortization for each year the bond approaches maturity, when the effective-interest method is used, would increase.
D)The amount of amortization would be reported as an increase in cash flow from operating activities.

Question

Quizplus · Accepted Answer

The amount of amortization would not be reported as an increase in cash flow from operating activities. This is because the amortization of a bond discount or premium is a non-cash expense and is added back to net income in the operating activities section of the cash flow statement.

When a Bond Payable Is Issued at a Discount, Which