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) After 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) After recording the interest expense, the amortization will increase the bond carrying value.

Question

Quizplus · Accepted Answer

The interest expense is greater than the interest paid, indicating that the bonds were sold at a discount. Therefore, the amortization of the discount will increase the bond carrying value.

Restoration Company Issued Bonds That Had the Following Data Associated