Interest expense recognized each period on zero-coupon bonds sold at a discount is equal to the
A)credit to Cash
B)difference between the cash payment and the discount amortization
C)credit to Discount on Bonds Payable
D)sum of the cash payment and the discount amortization

Question

Quizplus · Accepted Answer

Interest expense on zero-coupon bonds sold at a discount is recognized through the amortization of the discount, which increases the carrying amount of the bond over time. This is recorded as a credit to the Discount on Bonds Payable account, not as a cash transaction or directly related to cash payments, since zero-coupon bonds do not have periodic interest payments.

Interest Expense Recognized Each Period on Zero-Coupon Bonds Sold at a Discount