When bonds are issued at a discount, interest expense over the term of debt equals the cash interest paid
A) Minus the discount
B) Minus the discount minus the par value
C) Plus the discount
D) Plus the discount plus the par value

Question

Quizplus · Accepted Answer

Interest expense over the term of the debt equals the cash interest paid plus the discount. The discount on bonds payable is an additional cost of borrowing and is amortized over the life of the bonds, effectively increasing the amount of interest expense recorded each period.

When Bonds Are Issued at a Discount, Interest Expense Over