Interest expense recognized over the life of an obligation is the difference between cash received at the time of issuance and cash paid over the life of the obligation for
A)dividends declared.
B)convertible bonds.
C)non-interest-bearing obligations.
D)receivables due from customers.

Question

Quizplus · Accepted Answer

Interest expense recognized over the life of an obligation, particularly for non-interest-bearing obligations, is indeed the difference between the cash received at the time of issuance and the cash paid over the life of the obligation. This is because the face amount is paid at maturity, but the actual amount received at issuance is less due to the discount, which represents the interest cost over the period.

Interest Expense Recognized Over the Life of an Obligation Is