When is interest expense less than interest paid?
A)when bonds are sold at a premium
B)when bonds are sold at par
C)when bonds are sold at a discount
D)when bonds are sold at a yield

Question

Quizplus · Accepted Answer

When bonds are sold at a premium, the company receives more cash than the face value of the bonds. As a result, the interest paid will be higher than the interest expense, as the interest expense is calculated based on the face value of the bonds while the interest paid is calculated based on the actual cash paid out.

When Is Interest Expense Less Than Interest Paid