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 minus the discount amortization.
C) credit to Discount on Bonds Payable.
D) sum of the cash payment plus the discount amortization.

Question

Quizplus · Accepted Answer

Interest expense on zero-coupon bonds sold at a discount is recognized through the increase in the carrying amount of the bond, which is achieved by crediting (reducing) the Discount on Bonds Payable account. There are no cash payments involved until maturity, as zero-coupon bonds do not pay periodic interest.

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