On July 1,2019,Garden Works,Inc.issued $300,000 of ten-year,7% bonds for $303,000.The bonds were dated July 1,2019,and semiannual interest will be paid each December 31 and June 30.Garden Works Inc.uses the straight-line method of amortization.
-Which of the following statements is incorrect?
A) The market rate of interest was less than the coupon rate of interest on July 1,2019.
B) The interest expense during the life of the bonds is $3,000 less than the cash interest payments during the life of the bonds.
C) The book value of the bond liability decreases by $300 per year.
D) The semiannual interest expense is $300 less than the semiannual interest payment.
Correct Answer:
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