Restoration Company issued bonds that had the following data associated with them: Interest to be paid is $40,000.
Interest expense to be recorded is $45,000.
Which of the following characteristics is true?
A)The bonds are sold at a premium.
B)When recording the interest expense, the amortization will decrease the bond carrying value.
C)The difference between the interest expense and the interest to be paid is the bond's par value.
D)When recording the interest expense, the amortization will increase the bond carrying value.

Question

Quizplus · Accepted Answer

The interest expense is higher than the interest paid, indicating that the bonds were issued at a discount. When bonds are issued at a discount, the amortization of the discount increases the bond's carrying value over time.

Restoration Company Issued Bonds That Had the Following Data Associated